Which of the following would reduce the ability of the self-correcting mechanism to direct an economy out of a recession quickly?
A) a decrease in the real rate of interest
B) resource prices that are inflexible in a downward direction
C) an increase in aggregate demand
D) a low level of savings

Question

Quizplus · Accepted Answer

If resource prices are inflexible in a downward direction, then firms will not be able to reduce their costs as easily, making it harder to increase production and reduce prices, which would slow down the ability of the self-correcting mechanism to direct an economy out of a recession quickly. The other options (A, C, and D) would typically help stimulate the economy and promote a quicker recovery from a recession.

Which of the Following Would Reduce the Ability of the Self-Correcting