One Reason NOT to Wait for Wage Rates and Other

question 5

Multiple Choice

One reason NOT to wait for wage rates and other input prices to fall and shift the short-run aggregate supply curve to the right in an economy experiencing a recessionary gap is that

• A) such action will result in inflation.
• B) unemployment would fall too fast for a complete adjustment.
• C) a government budget deficit would be created.
• D) it would take too long because wages and prices tend to be sticky.
• E) falling prices would reduce exports.

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