At ________ levels of output, the economy can expand with little or no increase in the overall price level because firms likely hold excess labor and capital, and production can be increased without causing input prices to increase.

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At low levels of output, the economy can expand with little or no increase in the overall price level because firms likely hold excess labor and capital, and production can be increased without causing input prices to increase. At high levels of output, firms may reach their production capacity and can only increase output by increasing input prices, which causes inflation. At full employment or full capacity, the economy cannot expand further without causing inflation.

At ________ Levels of Output, the Economy Can Expand with Little