Suppose the Economy Is in a Short-Run Equilibrium and Actual

Multiple Choice

Suppose the economy is in a short-run equilibrium and actual output is greater than potential output. The economy is in:

A) an inflationary gap; nominal wages will increase and SRAS will shift to the left until actual GDP is equal to potential GDP in the long run.
B) a recessionary gap; nominal wages will decrease and AD will shift to the left until actual GDP is equal to potential GDP in the long run.
C) an inflationary gap; prices of goods will increase and AD will shift to the right until the economy is in long-run equilibrium.
D) a recessionary gap; prices of goods will decrease and LRAS will shift to the left until the economy is in long-run equilibrium.