When people want more goods and services than are available,the economy undergoes inflation.Which economic principle does this statement BEST represent?
A)There are gains from trade.
B)When markets don't achieve efficiency,government intervention can improve society's welfare.
C)Overall spending sometimes gets out of line with the economy's productive capacity.
D)Government policies can change spending.

Question

Quizplus · Accepted Answer

This statement best represents the principle that overall spending sometimes gets out of line with the economy's productive capacity, which leads to inflation. This is because when people want more goods and services than are available, there is a shortage which leads to an increase in prices, ultimately causing inflation.

When People Want More Goods and Services Than Are Available,the