Self-correcting

Definition

When the economy self-corrects, it means that it naturally adjusts to fix imbalances and return to its long-term equilibrium without any government intervention. This can happen through changes in prices, wages, or other economic factors.

Related terms

Inflationary Gap: This term refers to a situation where aggregate demand exceeds aggregate supply, causing prices and inflation to rise.

Stabilization Policy: It refers to government actions aimed at reducing fluctuations in the business cycle and promoting stable economic growth.

Monetary Policy: The means by which a central bank controls the money supply and interest rates in order to influence economic activity.