The idea that an economy can get stuck in either an unemployment equilibrium or an inﬂation equilibrium is most closely associated with
A) new classical economics.
B) the real-business-cycle theory.
C) monetarism.
D) the idea of coordination failures.

Question

Quizplus · Accepted Answer

The idea of coordination failures suggests that an economy can get stuck in either an unemployment equilibrium or an inflation equilibrium where it becomes difficult for the market to coordinate towards a more desirable outcome. This concept is associated with Keynesian economics and the role of government intervention in stabilizing the economy. The other options (new classical economics, real-business-cycle theory, and monetarism) do not explicitly address the concept of coordination failures.

The Idea That an Economy Can Get Stuck in Either