When an economy is temporarily operating at an output that is beyond its full-employment rate,
A) excess supply in resource markets will eventually lead to lower resource prices, which will decrease costs and direct the economy toward full employment.
B) excess demand in resource markets will lead to higher resource prices, which will increase costs and direct the economy toward full employment.
C) lower wages and prices will quickly restore full employment.
D) only restrictive fiscal policy will direct the economy back to full employment.

Question

Quizplus · Accepted Answer

If an economy is operating at a level beyond full employment, there will be excess demand in resource markets, leading to higher resource prices. This increase in costs will eventually prompt firms to reduce output and possibly employment, bringing the economy back to full employment.

When an Economy Is Temporarily Operating at an Output That