The "Yes - Markets Self-Adjust" camp argues that a positive demand shock results in
A) falling Canadian average prices, increasing net exports.
B) falling wages, reducing excess demand for labour.
C) rising wages, reducing excess supply of labour.
D) rising interest rates, decreasing business investment spending, and decreasing aggregate demand.
E) falling interest rates, increasing business investment spending, and increasing aggregate demand.

Question

Quizplus · Accepted Answer

The "Yes - Markets Self-Adjust" camp believes in the self-correcting nature of markets. A positive demand shock would lead to higher interest rates as part of the monetary policy response to control inflation. This, in turn, would decrease business investment spending and aggregate demand, helping to stabilize the economy.

The "Yes - Markets Self-Adjust" Camp Argues That a Positive