The "No - Markets Fail Often" camp argues that in a recessionary gap, all of the following will happen except,
A) workers resist wage cuts.
B) employers resist wage cuts.
C) falling interest rates increase business investment.
D) falling output creates pessimistic expectations that decrease business investment.
E) destabilizing demand shocks from R.O.W.

Question

Quizplus · Accepted Answer

The "No - Markets Fail Often" camp argues that falling interest rates do not always increase business investment in a recessionary gap because businesses may have pessimistic expectations due to falling output, as stated in choice D. The other options listed, A, B, and E, are all examples of factors that can contribute to the persistence of a recessionary gap by creating obstacles to wage adjustment or causing destabilizing shocks in the market.

The "No - Markets Fail Often" Camp Argues That in a Recessionary