5. If the actual GDP is greater than YN, it will return to YN in the...
5. If the actual GDP is greater than YN, it will return to YN in the long run. Why and how does this happen?
Homework Answers
In actual GDP is greater than Yn then there is inflationary gap. Due to inflation, real wage rate decreases and workers will start demanding high wages which increases cost of production and shift the SRAS to the left leading decrease in output to Yn and higher price.
Thus final output will be at Yn and price will be higher
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5. If the actual GDP is greater than YN, it will
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plz thanks 7. Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP...
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