If a Market Economy Has a Self-Correcting Mechanism, When Output

question 165

Multiple Choice

If a market economy has a self-correcting mechanism, when output is lower than potential or full-employment output,

• A) changes will occur that will automatically guide the economy back to full employment.
• B) resource prices will increase.
• C) prolonged unemployment such as was experienced during the Great Depression will occur.
• D) the economy will fall into a more severe recession.

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Definitions:

Marshall Plan

A U.S.-initiated program providing massive financial aid to Western Europe after World War II to rebuild economies and prevent the spread of communism.

Communism

A political and economic ideology that advocates for a classless society in which all property is publicly owned, and each person works and is paid according to their abilities and needs.

European Economic Community

An economic organization that aimed to bring about economic integration among its member states, a precursor to the European Union.

Trade Barriers

Measures implemented by countries to regulate or restrict trade with other countries, including tariffs, quotas, and import bans, typically aimed at protecting domestic industries.