Automatic adjustment will take place

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If the current income level in the economy is above equilibrium, macroeconomic theory suggests that an automatic adjustment will take place. How does the economy know that it is not in equilibrium and that such an adjustment should take place? What would cause the adjustment to occur? How would the economy know when to stop adjusting?

Can you please explain and help answer this? Is this the opposite of a recession, or is it the adjustment a recession?

Reference no: EM132405830

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