A recessionary gap will be eliminated because there is _____ pressure on wages, shifting the _____.
A) downward; short-run aggregate supply curve rightward
B) downward; short-run aggregate supply curve leftward
C) downward; aggregate demand curve downward
D) upward; aggregate demand curve leftward

Question

Quizplus · Accepted Answer

In a recessionary gap, there is typically less demand for labor, which puts downward pressure on wages. This, in turn, can reduce production costs for businesses, leading to a rightward shift in the short-run aggregate supply curve as firms are willing and able to produce more at each price level.

A Recessionary Gap Will Be Eliminated Because There Is _____