If GDP was above trend for an 18-month period we would expect the following variables to change.
A) Unemployment to rise, inflation to fall, money supply to expand and real wages to rise.
B) Unemployment to rise, inflation to fall, money supply to contract and real wages to fall.
C) Unemployment to fall, inflation to rise, money supply to contract and real wages to fall.
D) Unemployment to fall, inflation to rise, money supply to expand and real wages to rise.

Question

Quizplus · Accepted Answer

If GDP is above trend for an extended period of time, it typically means that the economy is producing more goods and services than it normally would, leading to lower unemployment and higher inflation. In order to keep up with this increased demand, the money supply would need to expand. Higher demand for labor would lead to higher real wages.

If GDP Was Above Trend for an 18-Month Period We