Question 3

If an economy is currently in a recessionary gap and if the economy is self-regulating: short-run aggregate supply (SRAS) increases and the SRAS curve will shift to the right because businesses will pay wages at lower rates.This results in a smaller recessionary gap (choose one):TrueorFalse?

Question 4

If an economy is currently in an inflationary gap and if the economy is self-regulating: short-run aggregate supply (SRAS) decreases and the SRAS curve will shift to the left because businesses will pay wages at higher rates.This results in a smaller inflationary gap (choose one):TrueorFalse?

Question 5

In order for the economy to be self-regulating, wage rates (and other resource prices) do not ever change if there is a recessionary or inflationary gap (choose one):TrueorFalse?

Question 6

If the economy is self-regulating, the economy will eventually move into long-run equilibrium (long-run equilibrium is achieved when the economy is at full employment, and when Real GDP = Natural Real GDP, and when the unemployment rate = natural unemployment rate) (choose one):TrueorFalse?