When the economy is already operating at nearly full capacity, further fiscal or monetary stimulus will likely:
A)soften inflationary pressures in sectors already at capacity, and increasing employment in sectors with excess capacity.
B)trigger inflationary pressures in sectors already at capacity, and decreasing employment in sectors with excess capacity.
C)soften inflationary pressures in sectors already at capacity, and decreasing employment in sectors with excess capacity.
D)trigger inflationary pressures in sectors already at capacity, and increasing employment in sectors with excess capacity.

Question

When the economy is already operating at nearly full capacity, further fiscal or monetary stimulus will likely:
A)​soften inflationary pressures in sectors already at capacity, and increasing employment in sectors with excess capacity.
B)​trigger inflationary pressures in sectors already at capacity, and decreasing employment in sectors with excess capacity.
C)​soften inflationary pressures in sectors already at capacity, and decreasing employment in sectors with excess capacity.
D)​trigger inflationary pressures in sectors already at capacity, and increasing employment in sectors with excess capacity.

Quizplus · Accepted Answer

When the economy is near full capacity, additional fiscal or monetary stimulus tends to increase demand further. This can lead to inflationary pressures in sectors that are already at their limits, as they cannot increase output to meet the higher demand. However, it might still increase employment in sectors that have not yet reached their full capacity, as these sectors can expand output to meet the increased demand.

When the Economy Is Already Operating at Nearly Full Capacity