Suppose GDP ________ the level of potential output. We would expect to see ________ unemployment, rising wages, and rising prices.
A) exceeds; high
B) exceeds; low
C) is below; high
D) is below; low

Question

Quizplus · Accepted Answer

When GDP exceeds the level of potential output, it indicates an economy operating above its sustainable capacity, leading to low unemployment due to high demand for labor, which in turn causes wages and prices to rise due to increased demand and competition for resources.

Suppose GDP ________ the Level of Potential Output