Solution Found!
Suppose a rise in productivity increases potential output and creates a recessionary
Chapter 0, Problem 2(choose chapter or problem)
QUESTION:
Suppose a rise in productivity increases potential output and creates a recessionary gap. Explain how the economy can self-correct in the long run.
Questions & Answers
QUESTION:
Suppose a rise in productivity increases potential output and creates a recessionary gap. Explain how the economy can self-correct in the long run.
ANSWER:Step 1 of 2
A recessionary gap is when the actual output is less than the potential or full employment level. The wages in the economy will fall due to this gap.