If potential output exceeds actual output, eventually:
A)input prices will rise and output will fall.
B)both input prices and output will rise.
C)input prices will fall and output will rise.
D)both input prices and output will fall.

Question

Quizplus · Accepted Answer

When potential output exceeds actual output, it indicates underutilization of resources. Over time, this leads to a decrease in input prices as resources are abundant and not fully employed. Lower input prices make production more attractive, leading to an increase in output as firms take advantage of cheaper inputs to produce more.

If Potential Output Exceeds Actual Output, Eventually