Which of the Following Will Likely Happen If an Economy

question 170

Multiple Choice

Which of the following will likely happen if an economy is experiencing an inflationary gap?

• A)Consumption will decrease because goods and services are too expensive.
• B)Unemployment will be above the natural rate because Real GDP is less than Potential GDP.
• C)Unemployment will be equal to the natural rate because of high aggregate demand.
• D)Firms will bid up wage rates in an effort to attract and secure scarce labour.
• E)Firms will bid down wage rates in order to create unemployment.

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