The Process of an Economy Adjusting from a Recession Back

question 194

Multiple Choice

The process of an economy adjusting from a recession back to potential GDP in the long run without any government intervention is known as

• A)monetary policy.
• B)an automatic mechanism.
• C)"releasing sticky prices."
• D)fiscal policy.

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Definitions:

Long-run Phillips Curve

A concept suggesting that in the long term, there is no trade-off between inflation and unemployment, implying that efforts to reduce unemployment will not lead to higher inflation in the long run.

Long-run Phillips Curve

A graphical representation suggesting that in the long run, there is no trade-off between inflation and unemployment.

Higher Inflation

Higher Inflation occurs when there is a sustained increase in the general price level of goods and services, reducing purchasing power over time.

Long Run

A period in economics where all inputs can be adjusted, and companies can change all factors of production.