Question - Output gaps and the self adjustment mechanism Assume an economy initially at full employment. Now suppose businesses and consumers are more pessimistic of the economy because of coronavirus. a) Would this lead to a recessionary or inflationary gap? Explain with the Aggregate Demand/Aggregate Supply Model. (3 marks) b) Given the output gap you identified in part (a), explain how the economy will self-adjust (revert) back to full employment without government intervention