An Economy Adjusts on Its Own to Close a Recessionary

question 60

Multiple Choice

An economy adjusts on its own to close a recessionary gap because there is

• A) pressure on nominal wages to fall and this shifts the SRAS curve rightward.
• B) pressure on nominal wages to rise and this shifts the SRAS curve rightward.
• C) pressure on nominal wages to fall and this shifts the SRAS curve leftward.
• D) pressure on nominal wages to rise and this shifts the SRAS curve leftward.

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Present Value

The contemporary value of a forthcoming sum of money or cash flow series, adjusted for a specific rate of return.

Cash Flow Stream

A series of cash inflows and outflows over a period of time, often used in financial analysis and investment decisions.