Approaching a business cycle peak,actual real GDP ________ natural real GDP,which causes inflation to ________.
A)exceeds,remain constant
B)exceeds,accelerate
C)is less than,decelerate
D)equals,accelerate
E)equals,remain constant

Question

Quizplus · Accepted Answer

When actual real GDP exceeds natural real GDP, it means that the economy is operating above its potential, leading to tight labor and resource markets. This puts upward pressure on prices and causes inflation to accelerate. This typically happens during the peak phase of the business cycle.

Approaching a Business Cycle Peak,actual Real GDP ________ Natural Real