When the economy is producing at a quantity greater than its long-run aggregate supply:
A) it is pushing some of its resources to operate beyond capacity.
B) it is experiencing greater economic growth.
C) a bubble forms in one of its major sectors.
D) it is experiencing a recession.

Question

Quizplus · Accepted Answer

When the economy is producing at a quantity greater than its long-run aggregate supply, it is pushing some of its resources to operate beyond capacity. This can lead to increased costs, such as higher wages or energy prices, as suppliers struggle to keep up with demand. It can also lead to decrease in the quality of products or services as firms cut corners to keep up with demand, ultimately leading to inflation and a decrease in economic efficiency.

When the Economy Is Producing at a Quantity Greater Than