Why does self-correction work to close a recessionary gap?
A) because a labour shortage causes money wages to increase
B) because a labour surplus causes money wages to increase
C) because a labour shortage causes money wages to fall
D) because a labour surplus causes money wages to fall

Question

Why does self-correction work to close a recessionary gap?  
A) because a labour shortage causes money wages to increase 
B) because a labour surplus causes money wages to increase 
C) because a labour shortage causes money wages to fall 
D) because a labour surplus causes money wages to fall

Quizplus · Accepted Answer

In a recessionary gap, there is a surplus of labor due to decreased demand for goods and services. Employers can therefore pay lower wages, which eventually decreases production costs and can lead to lower prices, stimulating demand and helping the economy recover.

Why Does Self-Correction Work to Close a Recessionary Gap