In the Long Run, Inflationary and Recessionary Gaps Are Self-Correcting

question 137

Multiple Choice

In the long run, inflationary and recessionary gaps are self-correcting because eventually:

• A) nominal wages rise to close an inflationary gap or fall to close a recessionary gap.
• B) the government applies the right combination of fiscal and monetary policies.
• C) the multiplier compensates for the negative supply or demand shocks.
• D) nominal wages rise to close a recessionary gap and fall to close an inflationary gap.

---

Definitions:

Peripheral Nervous System

Part of the nervous system outside the brain and spinal cord, including all the nerves that extend to the rest of the body, responsible for transmitting sensory and motor information.

Somatic Nervous System

The part of the peripheral nervous system that handles voluntary control of body movements through the control of skeletal muscles.

Sensory Neurons

Nerve cells responsible for converting external stimuli from the organism's environment into internal electrical impulses.

Pituitary Gland

A pea-sized gland situated at the base of the brain, vital for regulating essential body functions and general wellbeing.