Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The economy self-corrects back to full employment without government intervention.
B
Changes in nominal wages can shift the short-run aggregate supply curve.
C
An increase in interest rates always leads to a decrease in aggregate supply.
D
The long run economic adjustment process can result in increased output levels over time.
E
Resource prices do not impact the economy's recovery during adjustment.
Understanding the Answer
Let's break down why this is correct
Answer
Long run economic adjustment refers to how an economy responds to changes over time, allowing it to reach a new balance after a shock or shift. When an economy faces a change, like a sudden increase in demand for a product, firms may initially struggle to keep up. However, over the long run, they can adjust by hiring more workers, investing in new technology, or increasing production. For example, if a new smartphone becomes very popular, manufacturers will eventually expand their factories and improve their processes to meet the demand. This adjustment helps stabilize prices and ensures that resources are used efficiently, leading to overall economic growth.
Detailed Explanation
Other options are incorrect because Some people think the economy can fix itself without help; It's a common belief that changing wages affects short-term supply.
Key Concepts
Long Run Economic Adjustment
Short-Run Aggregate Supply
Self-Correcting Economy
Topic
Long Run Economic Adjustment
Difficulty
easy level question
Cognitive Level
understand
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