Limited access

Upgrade to access all content for this subject

An economy is operating in the short run in an inflationary gap. In the absence of government intervention, which of the following changes will occur in the long run?

A

Nominal wages will rise, short-run aggregate supply will shift to the left, and output will return to long-run equilibrium at a higher price level.

B

Interest rates will rise, aggregate demand will fall, and output will return to long-run equilibrium at a lower price level.

C

Interest rates will rise, short-run aggregate supply will shift to the left, and output will return to long-run equilibrium at a higher price level.

D

Nominal wages will rise, short-run aggregate supply will shift to the right, and output will return to long-run equilibrium at a lower price level.

E

Nominal wages will fall, aggregate demand will shift to the left, and output will return to long-run equilibrium at a lower price level.

Select an assignment template