The speed with which an economy adjusts to eliminate an income gap depends on:
A) the flexibility of wage rates and prices in the economy.
B) the slope of the AS curve.
C) the size of potential GDP.
D) the rate of net indirect taxation.

Question

Quizplus · Accepted Answer

The flexibility of wage rates and prices determines how quickly an economy can adjust to changes, thereby eliminating an income gap. More flexible wages and prices allow for faster adjustments.

The Speed with Which an Economy Adjusts to Eliminate an Income