When the unemployment rate is low, the impact of additional spending on real output will
A) be larger than when the unemployment rate is high.
B) be smaller than when the unemployment rate is high.
C) be the same as when the unemployment rate is high.
D) place downward pressure on the general level of prices, leading to deflation.

Question

Quizplus · Accepted Answer

When the unemployment rate is low, the economy is closer to full capacity, so additional spending is more likely to lead to inflationary pressures rather than a significant increase in real output.

When the Unemployment Rate Is Low, the Impact of Additional