As the economy enters a boom we can generally expect that
A)inflation will decrease with little change in the unemployment rate
B)unemployment will increase and inflation will decrease
C)nominal GDP will increase but only because of an increase in the price level
D)inflation will increase and the unemployment rate will decrease
E)output will increase with little change in unemployment or inflation

Question

Quizplus · Accepted Answer

During a boom, there is increased demand for goods and services, which leads to an increase in prices (inflation). As firms increase production to meet the increased demand, they will also need to hire more workers, which leads to a decrease in unemployment rate. Therefore, D is the best choice as it describes the expected outcome during a boom period.

As the Economy Enters a Boom We Can Generally Expect