How does the economy self-correct and move from a short-run inflationary gap to a long-run equilibrium?

The economy self-corrects from a short-run inflationary gap to long-run equilibrium through the adjustment of prices and wages. As demand exceeds supply, prices rise, leading to increased costs for businesses. This prompts firms to reduce output and employment, ultimately decreasing aggregate demand. Over time, as wages and input prices adjust downward, the economy moves back toward its potential output, restoring equilibrium.