The "Yes - Markets Self-Adjust" camp argues that in a recessionary gap, all of these market adjustments will happen except,
A) price adjustments in the loanable funds market fix the saving problem for Say's Law.
B) falling wage rates increase the quantity of labour demanded.
C) falling interest rates increase business investment.
D) falling output prices increase aggregate quantity demanded.
E) falling output prices decrease net exports.

Question

Quizplus · Accepted Answer

The "Yes - Markets Self-Adjust" camp believes in the self-correcting nature of markets, where adjustments in prices, wages, and interest rates help to close a recessionary gap. However, falling output prices would actually increase net exports (not decrease), as domestic goods become cheaper for foreign buyers, thus increasing demand for these goods abroad. This is contrary to option E, making it the correct answer as the exception.

The "Yes - Markets Self-Adjust" Camp Argues That in a Recessionary