Which of the following will occur as part of the automatic adjustment process in an economy with an inflationary gap?
A)declining government purchases
B)rising wages
C)falling prices
D)increasing investment
E)increasing tax rates

Question

Quizplus · Accepted Answer

In an economy with an inflationary gap, rising wages occur as part of the automatic adjustment process. This happens because the demand for labor increases, leading to higher wages, which in turn can reduce the inflationary gap by decreasing aggregate demand.

Which of the Following Will Occur as Part of the Automatic