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Question 4

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Use the following to answer questions:
Figure: Output Gap Use the following to answer questions: Figure: Output Gap -(Figure: Output Gap) Refer to Figure: Output Gap. If the economy is at Y<sub>1</sub> as a result of expansionary 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
-(Figure: Output Gap) Refer to Figure: Output Gap. If the economy is at Y1 as a result of expansionary 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

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