An inflationary gap will be eliminated because there is _____ pressure on wages, shifting the _____.
A) downward; long-run aggregate supply curve to the right
B) downward; long-run aggregate supply curve to the left
C) downward; aggregate demand curve to the left
D) upward; short-run aggregate supply curve to the left

Question

Quizplus · Accepted Answer

An inflationary gap will be eliminated due to upward pressure on wages as employers compete for scarce labor, which increases production costs. This leads to a leftward shift in the short-run aggregate supply curve, reducing the quantity of goods and services supplied at any given price level, and helps to eliminate the gap.

An Inflationary Gap Will Be Eliminated Because There Is _____