A recessionary gap is usually closed in the long run by a(n) _____
A) rightward shift of the short-run aggregate supply curve.
B) leftward shift of the short-run aggregate supply curve.
C) upward movement along a fixed short-run aggregate supply curve.
D) decrease in aggregate demand.
E) downward movement along a fixed short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

A recessionary gap is typically closed in the long run by a rightward shift of the short-run aggregate supply curve, as prices and wages adjust downward, making it more profitable for firms to increase production.

A Recessionary Gap Is Usually Closed in the Long Run