When actual output increases the 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 increases and exceeds the potential output, it leads to an increase in demand for goods and services in the economy, which causes an increase in prices due to limited supply. This inflationary pressure causes prices to tend to increase.

When Actual Output Increases the Potential Output,_____