The Long-Run Self-Correcting Mechanism That Eliminates Recessionary and Expansionary Output

question 78

Multiple Choice

The long-run self-correcting mechanism that eliminates recessionary and expansionary output gaps in the economy assumes

• A) only that the growth in wages and production costs adjusts over time.
• B) only that the inflation rate adjusts over time.
• C) only that the central bank adjusts the real interest rate over time in response to changes in the inflation rate.
• D) only that aggregate demand and actual output (Y)adjust towards potential output (Y*)over time.
• E) that the growth in wages and production costs,the inflation rate,the real interest rate,and aggregate demand and output all adjust over timE.

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Definitions:

Temporary Foreign Workers

Individuals from other countries employed in another country on a temporary basis, often to fulfill specific job shortages.

Asylum Seekers

Individuals who flee their home country to seek protection elsewhere due to persecution, violence, or fear of harm based on various grounds.

Family Class Sponsorships

A program specific to certain countries like Canada, allowing citizens or permanent residents to sponsor relatives, including spouses, partners, children, or other eligible relatives for immigration.

Economic Class

An immigration category that includes federal and Quebec-selected skilled workers, federal and Quebec-selected business immigrants, provincial and territorial nominees, the Canadian Experience Class (CEC), and caregivers, as well as spouses, partners, and dependants who accompany the principal applicants in any of these economic categories (Government of Canada, 2016a).