According to classical economic theory, which of the following describes the potential long-run self-correction of the economy depicted in the graph above? a. Consumption will come out of its stagnation and shift AD to the right, bringing output back to full employment levels. b. Wage rates will increase, attracting labor back to full employment levels ans increasing output back to its natural rate. c. Long-run aggregate supply will shift left due to decreases in spending and restore long-run equilibrium. d. Nominal wages will decrease as the duration of unemployment extends, eventually shifting short-run aggregate supply to the right, bringing output back to its natural level. e. Economies do not self-correct.
According to classical economic theory, which of the following describes the potential long-run self-correction of the economy depicted in the graph above?
a. Consumption will come out of its stagnation and shift AD to the right, bringing output back to full employment levels.
b. Wage rates will increase, attracting labor back to full employment levels ans increasing output back to its natural rate.
c. Long-run
d. Nominal wages will decrease as the duration of
e. Economies do not self-correct.
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