Use the following to answer questions:
Figure: Output Gap 
-(Figure: Output Gap) Refer to Figure: Output Gap. If the economy is at Y2 because of contractionary monetary policy and no further policy is implemented, in the long run nominal wages will _____ and shift the short-run aggregate supply curve to the _____, which will _____ real output.
Definitions:
Substitution Effect
The change in the consumption patterns of goods or services, as consumers replace pricier items with more affordable substitutes when prices change.
Income Effect
The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.
Real Hourly Wages
The hourly wage of workers adjusted for inflation, representing the purchasing power of the income.
Real Wages
Wages adjusted for inflation, giving a true measure of the purchasing power of earned income over time.
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