Which of the following most likely occurs when an inflationary gap exists?
A)Producers will use overtime shifts and strain capacity.
B)More layoffs.
C)Rising inventories.
D)Excessive saving.

Question

Quizplus · Accepted Answer

When an inflationary gap exists, the economy is operating above its potential output level, meaning there is high demand for goods and services. This often leads to producers using overtime shifts and straining capacity in order to keep up with demand. Option B (more layoffs) and option D (excessive saving) are less likely to occur in this situation, as demand for goods and services is high. Option C (rising inventories) may occur if producers are unable to keep up with demand and end up with excess supply, but this is less likely than producers using overtime shifts and straining capacity to meet demand.

Which of the Following Most Likely Occurs When an Inflationary