If a contractionary gap exists and resource prices are not flexible downward,the short-run aggregate supply curve will
A)shift leftward to return the economy to its potential output
B)shift rightward to return the economy to its potential output
C)not shift leftward to return the economy to its potential output
D)not shift rightward to return the economy to its potential output
E)become the long-run aggregate supply curve

Question

Quizplus · Accepted Answer

If resource prices are not flexible downward, the short-run aggregate supply curve will not shift rightward to return the economy to its potential output, as firms cannot reduce costs to increase supply.

If a Contractionary Gap Exists and Resource Prices Are Not