Wages and prices throughout an economy are less than previous inflation rates when what occurs?
A) Imports increase dramatically.
B) More goods are exported abroad.
C) Output exceeds potential output.
D) Output is less than potential output.

Question

Quizplus · Accepted Answer

When output is less than potential output, it typically indicates that the economy is not operating at full capacity, leading to lower demand for labor and goods. This situation can result in wages and prices rising at a slower pace than previous inflation rates, as there is less pressure on prices due to the underutilization of resources.

Wages and Prices Throughout an Economy Are Less Than Previous