If the Canadian economy is producing above its potential income, all of the following are likely to happen except:

Question

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When the Canadian economy is producing above its potential income, it is operating at a level where resources are being used at their maximum sustainable capacity. This situation is likely to lead to shortages of labour and raw materials (B) due to high demand, and prices will rise (C) as a result of these shortages and increased demand. Inventories will decline (D) because goods are being sold faster than they can be replenished. However, production is unlikely to continue to increase (A) because the economy is already operating at or beyond its sustainable capacity, making it difficult to further increase production without additional resources or improvements in productivity.

If the Canadian Economy Is Producing Above Its Potential Income