If the economy is self-regulating and in a recessionary gap,what happens?
A) Wages rise,the SRAS curve shifts leftward,and both Real GDP and the price level rise.
B) Wages fall,the SRAS curve shifts leftward,the price level rises,and Real GDP falls.
C) Wages fall,the SRAS curve shifts rightward,and both the price level and Real GDP fall.
D) Wages fall,the SRAS curve shifts rightward,the price level falls,and Real GDP rises.
E) none of the above

Question

Quizplus · Accepted Answer

In a self-regulating economy experiencing a recessionary gap, wages tend to fall due to the surplus of labor. This decrease in wages reduces production costs, causing the short-run aggregate supply (SRAS) curve to shift rightward. As a result, the price level falls, and Real GDP increases as the economy moves back towards its long-run equilibrium.

If the Economy Is Self-Regulating and in a Recessionary Gap,what