From the mainstream perspective, instability in the economy is due to:
A) Price flexibility, and shocks to either aggregate demand or aggregate supply
B) Price stickiness, and shocks to either aggregate demand or aggregate supply
C) Price flexibility, and government policies and regulation
D) Price stickiness, and government policies and regulation

Question

Quizplus · Accepted Answer

The mainstream perspective holds that the instability in the economy is due to price stickiness and shocks to either aggregate demand or aggregate supply. Price stickiness means that prices do not adjust quickly to changes in supply and demand, resulting in market inefficiencies and economic fluctuations. Shocks to aggregate demand or aggregate supply refer to sudden changes in consumer spending, business investment, government spending, or import/export activity, which can lead to recessions, inflation, or deflation. Government policies and regulation may also play a role in economic instability, but they are not considered the primary cause according to mainstream economics.

From the Mainstream Perspective, Instability in the Economy Is Due