Asked by Olusegun Ajulo on Jun 21, 2024
Verified
Which of these changes is observed in an economy when a recessionary gap is closed in the long run?
A) An increase in the inflation rate and a decrease in the unemployment rate
B) An increase in the level of output and a decrease in the price level
C) An increase in both the rate of output and the price level
D) A decrease in both the rate of output and the price level
E) A decrease in the inflation rate and an increase in the unemployment rate
Recessionary Gap
A situation where an economy's real GDP is lower than its potential GDP, indicating underutilized resources.
Inflation Rate
measures the annual percentage increase in the average price level of goods and services across the economy.
- Acquire knowledge on the effect that modifications in collective demand and supply have on the cost of goods and the amount produced.
- Discern the processes involved in reaching long-run equilibrium, encompassing both recessionary and expansionary discrepancies.
Verified Answer
DS
dsdas sdasdJun 25, 2024
Final Answer :
B
Explanation :
Closing a recessionary gap in the long run is achieved through an increase in potential output or productive capacity. This results in an increase in output and a decrease in the price level. There is no necessary change in the inflation rate or the unemployment rate.
Learning Objectives
- Acquire knowledge on the effect that modifications in collective demand and supply have on the cost of goods and the amount produced.
- Discern the processes involved in reaching long-run equilibrium, encompassing both recessionary and expansionary discrepancies.