Self-Correcting Mechanism Reveals That

question 150

Multiple Choice

Self-correcting mechanism reveals that

• A)real wages will increase if there is an increase in price.
• B)nominal wages will fall if there is inflationary gap.
• C)nominal wages will increase if there is recessionary gap.
• D)in the long run economy will be in equilibrium at potential GDP.

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Definitions:

Labor-saving

Technologies or methods that reduce the amount of work required to produce goods or services, often leading to increased efficiency and productivity.

Competitive Firm

A company operating in a market where it has little to no influence over the price of its product or service, typically due to the presence of many other firms offering similar products.

Labor Market

The market in which individuals offer their labor for employment and employers seek to hire labor.

Inflation-adjusted Wages

Wages that have been modified to reflect the purchasing power after accounting for inflation, often to measure real income changes over time.