Which of the following would be strong evidence that an expansionary gap exists?
A)Rapid inflation during a period when plant capacity utilization is below average.
B)A steady price level and a 5 percent unemployment rate.
C)Help wanted advertising is higher than usual,and the consumer price index is up more than expected.
D)Inflation has slowed markedly and the Dow Jones average is at record levels.
E)The number of new unemployment claims has skyrocketed and the price level is falling.

Question

Quizplus · Accepted Answer

Help wanted advertising being higher than usual indicates that the economy is producing at a level greater than its potential output. Additionally, an unexpected increase in the Consumer Price Index suggests that demand for goods and services is driving prices up, indicating the economy is overheating and creating an expansionary gap.

Which of the Following Would Be Strong Evidence That an Expansionary