The reason why self-correction works to close a recessionary gap is because:
A)a labor shortage causes wages to increase.
B)a labor surplus causes wages to increase.
C)a labor shortage causes wages to fall.
D)a labor surplus causes wages to fall.
E)a labor surplus causes price to fall.

Question

Quizplus · Accepted Answer

In a recessionary gap, there is a labor surplus, which puts downward pressure on wages, leading to lower production costs and eventually increasing aggregate supply, helping to close the gap.

The Reason Why Self-Correction Works to Close a Recessionary Gap