FIGURE 29-3
-Refer to Figure 29-3. Suppose the economy is at E1 and that there is no policy response by the Bank of Canada to this recessionary gap. Compared to the price level and real GDP at E1, the economy will tend towards a new long-run equilibrium characterized by an)

Question

Quizplus · Accepted Answer

In the long run, without policy intervention, the economy will self-correct to the potential GDP level, but with a lower price level due to downward pressure on prices in a recessionary gap.

FIGURE 29-3 -Refer to Figure 29-3. Suppose the Economy Is at E1