The main process by which a recessionary gap is eliminated is a(n)

Question

Quizplus · Accepted Answer

A recessionary gap is caused by a decrease in aggregate demand, resulting in a situation where the economy is operating below its potential output. To eliminate this gap, the aggregate supply curve needs to shift outward. A drop in wages would lead to a decrease in production costs for firms, resulting in an increase in the quantity of goods and services supplied at every price level. This would shift the aggregate supply curve outward and potentially help to eliminate the recessionary gap. Therefore, option D is the best choice.

The Main Process by Which a Recessionary Gap Is Eliminated