Fill in the blanks to make the following statements a. When actual GDP is higher than potential GDP, correct. we say that there is a(n) gap. When actual a. In our short-run macro model, it is assumed that GDP is less than potential GDP we say there is a(n) factor prices are and the level of potential gap. b. An inflationary gap leads to excess demand for output is . Changes in real GDP are caused by fluctuations in and labour, which causes wages and thus costs to rise. Firms require higher in order to b. During the adjustment process highlighted in this supply any level of output, and so the AS curve chapter, the central assumption is that factor prices are and respond to . Potential output shifts is assumed to be , and acts as a(n) for c. A recessionary gap leads to excess supply of labour, real GDP following AD or AS shocks. which tends to cause wages and thus costs to fall. Firms reduce _ for any level of output 2 Fill in the blanks to make the following statements supplied, and so the AS curve shifts correct