Use the Following to Answer Questions

question 350

Multiple Choice

Use the following to answer questions :
Figure: Output Gap
-(Figure: Output Gap) Look at the figure Output Gap. If the economy is at Y₂ because of contractionary monetary policy and no further policy is implemented, in the long run nominal wages will _____ and shift the short-run aggregate supply curve to the _____, which will _____ real output.

• A)increase; left; decrease
• B)increase; right; increase
• C)decrease; left; decrease
• D)decrease; right; increase