When the economy is producing at a quantity greater than its long-run aggregate supply:
A) it is pushing some of its resources to operate beyond capacity.
B) the economy is experiencing greater economic growth.
C) it causes a bubble to form in one of its major sectors.
D) we are experiencing a recession.

Question

Quizplus · Accepted Answer

When the economy is producing at a quantity greater than its long-run aggregate supply, it means that it is operating beyond its full capacity and utilizing its resources at a higher rate than sustainable in the long run. This can lead to inefficiencies and potential shortages, causing prices to rise and potentially leading to inflation. Therefore, choice A is the best answer. Choices B, C, and D are incorrect as they do not describe the situation accurately.

When the Economy Is Producing at a Quantity Greater Than