ogggticbjuievoindex.ntmirdeploymentid 5813 MINDTAP From Cengage plia Homework #9
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Question
ogggticbjuievoindex.ntmirdeploymentid 5813 MINDTAP From Cengage plia Homework #9: Chapter 9 Back to Assignment Attempts Score: /3 5. One attempt only: Multiple choice If the economy is self-regulating and in a recessionary gap, what happens? 0 wages fall, the SRAS curve shifts leftward, the price level rises, and Real GDP falls. Wages fall, the SRAS curve shifts rightward, and both the price level and Real GDP fall. Wages fall, the SRAS curve shifts rightward, the price level falls, and Real GDP rises. Wages rise, the SRAS curve shifts leftward, and both Real GDP and the price level rise.Explanation / Answer
If the economy is self regulating and in recessionary gap then..
Correct answer is option number 3: Where wages fall , hence cost of production falls and hence Aggregate supply shifts to the right making average price level to go down and finally real GDP rises.
In this way LRAS (Long run aggregate supply ) is maintained and economy achieves its original potential as it is self regulating.
Options 1 and 2 show further decrease in GDP Whereas option 4 shows opposite effects.
This is a monetarist concept.
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