The following is a list of economic events:
1.A big cut in the price of imported oil.
2.An increase in the money supply.
3.An increase in labour productivity.
4.A decline in the GDP of the USA
5.A big rise in nominal wages.
-How does the economy eventually adjust to a recessionary gap?
A)The nominal wage and price levels will both increase.
B)The nominal wage and price level will both decrease.
C)The nominal wage level will decrease but the price level will increase.
D)The nominal wage level will increase but the price level will decrease.

Question

Quizplus · Accepted Answer

In response to a recessionary gap, the economy adjusts through lower nominal wages and price levels. This adjustment helps to restore equilibrium by making labor and goods cheaper, encouraging hiring and spending, and ultimately stimulating economic activity.

The Following Is a List of Economic Events