Suppose the economy is experiencing a recessionary gap. In the long run, if aggregate demand does not change the money wage rate , ____________unemployment ,____________ and the price level____________
A) falls; falls; falls
B) rises; rises; rises
C) rises; falls; rises
D) falls; rises; falls

Question

Quizplus · Accepted Answer

In the long run, if aggregate demand does not change, the money wage rate will eventually fall due to high unemployment. This will lead to a decrease in production costs, causing the short-run aggregate supply to increase, which reduces unemployment and lowers the price level.

Suppose the Economy Is Experiencing a Recessionary Gap