if actual aggregate output is greater than potential output, then nominal wages will: please choose the correct answer from the following choices, and then select the submit answer button. answer choices eventually decrease. remain the same. eventually increase. stay sticky longer.

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25-10-2022
Business

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if actual aggregate output is greater than potential output, then nominal wages will: please choose the correct answer from the following choices, and then select the submit answer button. answer choices eventually decrease. remain the same. eventually increase. stay sticky longer.

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contexto1019 contexto1019 · Answer 1 · 2022-10-28T14:40:15-04:00

If actual output is below potential output, unemployment is high, and nominal wages will decrease.

Actual aggregate output will eventually equal potential output when nominal wages decrease and the short-run aggregate supply curve moves to the right when the economy is on the short-run aggregate supply curve and to the right of the long-run aggregate supply curve. As an economy enters or leaves a recession, its GDP will fluctuate briefly.

All things being equal, prices will start to increase in response to demand pressure in important markets if the production gap is positive over time, meaning that actual output is greater than potential output. Similar to this, prices will start to decline over time to reflect weak demand if actual output gradually falls below potential output.

To put it another way, actual production is growth that has really occurred in the real world, whereas potential output is the amount of growth that the economy is capable of. The output gap is the difference between current output and potential output.

To know more about potential output, refer:

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