Suppose the Economy Is Experiencing an Expansionary Gap

question 23

Multiple Choice

Suppose the economy is experiencing an expansionary gap.Which of the following will occur in the long run?  

• A) Workers will negotiate nominal wage increases that will shift the SRAS curve to the left. 
• B) Workers will negotiate nominal wage increases that will shift the SRAS curve to the right. 
• C) Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the right. 
• D) Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the left.

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Definitions:

Risk And Return

The principle that the potential return on any investment is directly correlated with the amount of risk taken; higher risks typically offer the chance for greater rewards.

Average Variance

The mean of the squared deviations from the mean of a data set, indicating its volatility or variability.

Investment Period

The investment period is the duration over which an investment is held before it is sold or liquidated.

Rate Of Inflation

The annual percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.