If unemployment is below its sustainable level, then the economy is:
A)experiencing below normal growth rates.
B)operating above capacity, and inflation will likely rise.
C)operating below capacity, and inflation will likely fall.
D)at potential GDP, and inflation is at its target level.

Question

Quizplus · Accepted Answer

When unemployment is below its sustainable level, it means that the economy is operating above capacity, indicating that there is high demand for goods and services but a shortage in labor. This situation often leads to an increase in wages and production costs, resulting in inflationary pressures. Therefore, option B is the best choice.

If Unemployment Is Below Its Sustainable Level, Then the Economy