An Increase in the Price of Inputs Will Most Likely

question 57

True/False

An increase in the price of inputs will most likely lead to a higher price level.

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Definitions:

Potential Output

The maximum amount of goods and services an economy can produce when it is most efficiently utilizing its resources.

Expansionary Gap

A situation in an economy where actual gross domestic product exceeds the potential GDP, leading to inflationary pressures.

Natural Rate

The level of economic output at which the rate of inflation is stable, often related to the concept of the natural rate of unemployment where the labor market is in equilibrium.

Consumer Price Index

A metric that analyzes the weighted average cost of a selection of consumer goods and services, such as medical care, transportation, and food, to measure inflation.