Question

Which of the following is true about an economy’s self-correcting tendency? An economy’s self-correcting tendency always makes active use of stabilization policy unnecessary. The more slowly the economy adjusts, the more likely it is that stabilization policy will be useful. The self-correcting tendency usually operates faster during deeper and more severe recessions. The absence of long-term contracts will make self-correction work slower in an economy.

Answer 1

The more slowly the economy adjusts, the more likely it is that stabilization policy will be useful.

Explanation: Self correcting tendency is a term used to describe the various processes and steps which an economy undergoes as it adjusts itself in order to ensure to start a growth trajectory or sustain a growth path.

The slower the process the better for the economy, as the stabilization process Continue gradually,it will be easy for it to stabilise that growth path and improve along with little adverse impacts of Economic threats.