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In the short term, a positive shock of aggregate demand is manifested in the appearance of an inflationary output gap. And the negative shocks of aggregate demand leads to a decrease in output and mean the transition of the economy to a point of short-term equilibrium. A recessionary output gap appears - a situation where actual GDP is less than potential.
Under conditions of perfect competition, deflation will occur and the economy will fall into a point of long-run equilibrium, where production is equal to potential.
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