Suppose that potential output is $5 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:
A) real GDP will rise.
B) wages and input prices will fall.
C) the price level will rise.
D) all of the above

Question

Quizplus · Accepted Answer

In the long run, when real GDP exceeds potential output, the economy is operating above its capacity, leading to upward pressure on prices, causing the price level to rise.

Suppose That Potential Output Is $5 Trillion and Real GDP