If the Self-Correcting Mechanism Operates Quickly

question 48

Multiple Choice

If the self-correcting mechanism operates quickly,

• A)direct intervention is less necessary to close a recessionary gap.
• B)fiscal stimulus is far more useful in closing a recessionary gap than monetary policy.
• C)monetary policy is far more useful in closing a recessionary gap than fiscal policy.
• D)fiscal stimulus is ineffective and inflation will occur.

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Definitions:

External Benefits

Advantages or positive effects generated by an economic activity that benefit individuals or entities not directly involved in the activity.

Market Forces

The natural forces of supply and demand that govern the functioning of the free market, determining prices and production levels.

Rival

Describes a good or resource that cannot be consumed by more than one person or entity at the same time without diminishing its availability to another.

Nonexclusive

A property of a good or service where one person's use does not diminish availability to others.