-The AD-AS model in the diagram above shows that at the initial short-run equilibrium point B,the economy is experiencing ___________ gap.Other factors remaining the same,the self-correcting mechanism of the economy will result in ___________ prices and ___________ output until the economy eventually moves to the point A,thus eliminating the output gap.

Question

Quizplus · Accepted Answer

At point B, the economy is experiencing a recessionary gap, where actual output is below potential output. The self-correcting mechanism involves falling prices, which increases aggregate demand, leading to rising output until the economy reaches full employment at point A.

-The AD-AS Model in the Diagram Above Shows That at the Initial