Which of the Following Is True Regarding the Closing of a Contractionary

question 6

Multiple Choice

Which of the following is true regarding the closing of a contractionary gap?

• A)The only way for the gap to close is for nominal wages to rise.
• B)Such a gap could be closed if the nominal wage grew more slowly over time than the price level.
• C)Once the economy falls into a contractionary gap,only a strong reduction in aggregate demand could close the gap.
• D)Inflation eventually ends contractionary gaps.
• E)Nominal wages and real wages should rise.

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Definitions:

Trichromatic Theory

A theory that explains how the human eye perceives colors through the response of three types of cones sensitive to different wavelengths of light.

Opponent-Process Theory

A psychological and neurological model that explains contrasting emotional and sensory experiences through the activation and inhibition of specific processes.

Color Vision

The ability of the visual system to distinguish and perceive different wavelengths of light as distinct colors.

ESP

Extra-Sensory Perception; the supposed ability to gain information without using the known human senses.