Figure 10-4

-In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Question

Figure 10-4
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-In Figure 10-4, if full employment occurs at an output level of 4,000 and the economy is currently at an output level of 5,000, then we can expect a(n)

Quizplus · Accepted Answer

If the economy is currently producing above its full employment output level (5,000 vs. 4,000), it indicates an overheated economy. In such a scenario, we can expect an increase in wages as firms compete for a limited labor supply. This increase in wages will increase production costs, leading to a leftward shift in the aggregate supply curve.

Figure 10-4 ​

Figure 10-4