Question

In: Economics

​The economy will not stay at a level of GDP above full employment GDP for too long because this will cause

The economy will not stay at a level of GDP above full employment GDP for too long because this will cause

Select one:

a. The price of raw materials and nominal wages to fall which in turn will cause the LRAS to shift to the right

b. The price of raw materials and nominal wages to fall which in turn will cause the SRAS to shift to the right

c. The price of raw materials and nominal wages to rise which in turn will cause the LRAS to shift to the left

d. The price of raw materials and nominal wages to rise which in turn will cause the SRAS to shift to the left

Solutions

Expert Solution

(d) the price of raw materials and nominal wages to rise which in turn will cause the SRAS cureve to shift to the left.

Explanation:

The economy will not stay at a level of GDP above full employment GDP for too long because this will cause a situation of inflationary gap where the prices of raw materials and nominal wages will increase which in turn will cause the short run aggregate supply curve to the left.

Rahul Sunny answered 2 years ago
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