If the current AD curve intersects the LAS curve at a positive price level,can self-correction be thwarted?
A)No: it is inevitable.
B)Yes: via the Pigou effect.
C)Yes: via downwardly-rigid wages.
D)Yes: via monetary impotence.

Question

Quizplus · Accepted Answer

If the AD curve intersects the LAS curve at a positive price level, self-correction can be thwarted through downwardly-rigid wages. This means that wages in the economy remain sticky and do not adjust quickly to changes in the market conditions. As a result, the labor market does not clear, and unemployment persists for an extended period, leading to a slower self-correction.

If the Current AD Curve Intersects the LAS Curve at a Positive