The AD-AS model in the diagram above shows that at the initial short-run equilibrium point A,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 the point at B,thus eliminating the output gap.

Question

Quizplus · Accepted Answer

The economy is experiencing an expansionary gap at point A, meaning output is above potential. The self-correcting mechanism will lead to rising prices and falling output as the economy moves to point B, closing the gap.

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