Final answer:
To move the U.S. economy back to long-run equilibrium during a recessionary gap, the SRAS may adjust as resource prices, including wages, decrease, shifting the SRAS curve to the right, increasing real GDP and potentially decreasing the price level. Additionally, expansionary fiscal policy can be employed to shift AD rightward, helping to close the gap and restore equilibrium.
Step-by-step explanation:
If the U.S. is in a recessionary gap, the short-run aggregate supply (SRAS) may adjust to move the economy back toward long-run equilibrium. This adjustment process typically involves changes in resource prices, including wages, that become flexible over time. During a recessionary gap, unemployment is high, and as a result, workers are more willing to accept lower wages. As wages decrease, production costs for companies go down, which can shift the SRAS curve to the right. This rightward shift results in greater real GDP and could also lead to a downward pressure on the price level if aggregate demand remains unchanged.
However, with a fixed aggregate demand, the gains in real GDP due to a shift of the SRAS will be small in the short term. In the long run, factors such as increased productivity and technological advancements can lead to a rightward shift in SRAS, further closing the gap between the current level of GDP and potential GDP, illustrated by the long-run aggregate supply (LRAS) curve.
According to Keynesian economics, if an economy is operating in the Keynesian zone of the SRAS curve, which is relatively flat, changes in aggregate demand can increase output and employment without causing significant inflation. Therefore, expansionary fiscal policy, such as tax cuts or increased government spending, is often used to shift the aggregate demand (AD) curve to the right towards the full-employment level of output, aiming to eliminate the recessionary gap and restore equilibrium at potential GDP.