Assuming the economy is experiencing a recessionary gap, classical economists predict that a....
Question:
Assuming the economy is experiencing a recessionary gap, classical economists predict that
a. wages will remain fixed.
b. monetary policy should intervene.
c. higher wages will shift the short-run aggregate supply curve leftward.
d. lower wages will shift the short-run aggregate supply curve rightward.
Recessionary Gap:
A recessionary gap occurs when current real output is below potential real output. The gap is the size of the difference between the two. Potential GDP is the maximum level of sustainable output an economy can produce when it uses all resources available.
Answer and Explanation: 1
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Classical economists argue that the economy self-corrects. When there is a recessionary gap and unemployed rises, they argue wages will...
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Economy Models: Classical Vs Keynesian
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Chapter 60 / Lesson 1
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Economic models are used by economists to describe capitalist economies. Explore economic models, discover details about the classical and Keynesian models, and learn about the differences between these models.
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