Assuming the economy is experiencing a recessionary gap, classical economists predict that:
a. wages will remain fixed.
b. lower wages will shift the short-run aggregate supply curve rightward.
c. monetary policy should intervene.
d. higher wages will shift the short-run aggregate supply curve leftward.
a
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One of the predictions of the HO model is that
A) countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other. B) countries will tend to specialize, but not completely, in their comparative advantage good. C) reciprocal demand leads to an equilibrium terms of trade by inducing changes in both demand and supply. D) All of the above.
The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A