When actual output exceeds potential output, _____
A) more resources become unemployed.
B) prices remain constant.
C) prices tend to increase.
D) nominal GDP decreases.
E) resource prices decrease.

Question

Quizplus · Accepted Answer

When actual output exceeds potential output, there is more demand for goods and services than there are productive resources available, leading to a shortage. This can result in an increase in prices as producers try to increase their profits by raising prices.

When Actual Output Exceeds Potential Output, _____