An inflationary output gap would generate which of the following conditions in the economy?
A)There is an unusually small demand for labour.
B)Workers have a relatively large amount of bargaining power with employers.
C)Firms are making low profits.
D)There is much idle capacity.
E)There is downward pressure on wages.

Question

Quizplus · Accepted Answer

An inflationary output gap occurs when actual output exceeds potential output, leading to high demand for labor and increased bargaining power for workers, as firms compete to hire and retain employees.

An Inflationary Output Gap Would Generate Which of the Following