If we observe an economy adjusting to potential GDP as prices ...

[karateprodigy]

If we observe an economy adjusting to potential GDP as prices fall and real output increases, we can conclude that _____.
 a. the economy was experiencing an expansionary gap
  b. there is a labor surplus
 c. the economy was experiencing a recessionary gap
  d. self-correction is not the process that is occurring
  e. there are widespread labor shortages

Question 2

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.

[jasonq]

Answer to Question 1

c

Answer to Question 2

d

[karateprodigy]

Excellent

[ecabral0]

TYSM