As actual output rises above the potential level,which of the following must be true?
A)more resources become unemployed
B)prices remain constant
C)real GDP rises
D)nominal GDP remains constant
E)production falls

Question

Quizplus · Accepted Answer

Actual output rising above potential level indicates an increase in the economy's productive capacity, leading to a rise in real GDP. Option A is incorrect because more output requires more resources, not less. Option B is incorrect because higher output generally leads to higher prices due to increased demand for goods and services, although it may not always be the case in the short run. Option D is incorrect because nominal GDP includes the effects of inflation, which is likely to increase with higher output. Option E is incorrect because actual output rising above potential level means an increase in production.

As Actual Output Rises Above the Potential Level,which of the Following