According to the simple extended AD-AS model, if the economy is in a recession, prices and
nominal wages will eventually fall and the short-run aggregate supply curve will increase, so that
real output returns to its full-employment level in the long run.

Question

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In the simple extended AD-AS model, if the economy is in a recession, prices and nominal wages will eventually fall, shifting the short-run aggregate supply curve to the right, which will increase output and decrease prices. This adjustment process eventually leads to the long-run equilibrium, where output returns to its full-employment level.

According to the Simple Extended AD-AS Model, If the Economy