Which of the Following Adjustments Will Most Likely Occur When

question 71

Multiple Choice

Which of the following adjustments will most likely occur when output exceeds the economy's long-run capacity?

• A) Prices will decline, bringing actual output into balance with its potential.
• B) The natural rate of unemployment will increase and, thereby, restore equilibrium.
• C) Higher resource prices and costs will reduce short-run aggregate supply until output falls to the economy's long-run capacity.
• D) Lower interest rates will increase the economy's long-run capacity and restore equilibrium.