d. The downward adjustment of wages in response to the short-run level of real GDP. In the long run, the a recessionary gap is much - than the upward greater rate of by firms will lead to a greater adjustment of wages in response to a(n). - gap. rate of growth of. Economists refer to this phenomenon as The following diagram shows two economies, A and Fill in the blanks to make the following statements B. Each are in short-run equilibrium at point E, where correct. the AD and AS curves intersect. a. Beginning with output equal to potential, suppose there is a sudden increase in demand for Canadian exports. This is a(n) shock to the Canadian AS economy, which will result in the curve shifting to the and the opening of a(n) gap. Firms' unit costs will start to and Price Level the curve will shift Long-run equilibrium will be restored at output and E price level. b. Beginning with output equal to potential, suppose 'AD there is a drop in business confidence and invest- ment falls. This is a(n) shock to the Canadian economy, which shifts the _ curve to the left and creates a(n). gap. Unit costs will start Real GDP Economy A to and the curve will shift share Long-run equilibrium will (slowly) be restored at output and price level