APFIVE AD-AS Model Self-Correction Mechanism
Which of the following best describes a similarity between the self‐adjustment processes following a recessionary gap and an inflationary gap in the AD-AS model?
A
Both mechanisms prompt adjustments in production costs and input prices that gradually realign actual GDP with potential GDP over time.
B
Both indicate that the economy will permanently remain either below or above its full‐employment output.
C
Both processes require immediate and direct government intervention to restore equilibrium.
D
Both self‐adjustments restore equilibrium instantly without any temporary adverse effects on prices or wages.
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