All other things being equal,in the absence of public policy,an economy producing more than its sustainable capacity will eventually
A) reduce its long run capacity by wearing out its capital and depleting its natural resources
B) increase its long run capacity to meet the demand
C) experience wage and price increases and cutbacks in supply until output is at capacity
D) export the excess output to other countries
E) exhibit improved technology

Question

Quizplus · Accepted Answer

When an economy produces beyond its sustainable capacity, it leads to increased demand for labor and resources, causing wages and prices to rise. This inflationary pressure eventually reduces demand and supply until output aligns with sustainable capacity.

All Other Things Being Equal,in the Absence of Public Policy,an