Compared to an economy's self-correcting mechanism, active contractionary fiscal policy will
A)work more slowly and calmly.
B)work more quickly.
C)have less deflationary effects.
D)have a smaller effect on real GDP.

Question

Quizplus · Accepted Answer

An economy's self-correcting mechanism works slowly over time to restore equilibrium to the market. In contrast, active contractionary fiscal policy is designed to have a more immediate and direct impact on the economy by reducing aggregate demand. This can lead to faster results in terms of reducing inflation or slowing down an overheated economy.

Compared to an Economy's Self-Correcting Mechanism, Active Contractionary Fiscal Policy