If the economy diverges from its full-employment output, new classical economics would suggest that
A)a change in the velocity of money would be all that is needed to return it to its full-employment output.
B)an improvement in insider-outsider relationships is all that is needed to return it to its full-employment output.
C)an efficiency wage in the economy would return it to its full-employment output.
D)internal mechanisms within the economy would automatically return it to its full-employment output.

Question

Quizplus · Accepted Answer

New classical economics suggests that the economy has self-correcting mechanisms, such as flexible prices and wages, which will automatically adjust to bring the economy back to its full-employment output without the need for external intervention.

If the Economy Diverges from Its Full-Employment Output, New Classical