Assume That the Economy Is Currently in a Recession Phase

Multiple Choice

Assume that the economy is currently in a recession phase. The self-adjustment mechanisms will lead to:

A) lower wages, lower factor prices, rightward shift of the AS curve and eventual rightward shift of the AD curve until recessionary gaps are removed.
B) lower wages, lower factor prices, rightward shift of the AS curve and downward movements across the given AD curve until recessionary gaps are removed.
C) higher GDP gap, lower wages and lower prices until potential GDP is reached.
D) lower prices, increases in the aggregate demand leading to the rightward shift of the AD curve untilrecessionary gaps are removed.