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What is Self-Regulating Economy Explained about?
Economists who believe the economy is self-regulating think that the government should not intervene and instead allow the economy to heal itself. Changes in wages and prices will eliminate inflationary or recessionary gaps without intervention. If an inflationary gap occurs where real GDP exceeds natural GDP, wages will rise, shifting the short-run aggregate supply curve and increasing prices, which will decrease demand and move the economy back to long-run equilibrium.
- Author
- Jingxuan Lee
- Language
- EN