Suppose the U

Business Dec 23, 2020

Suppose the U.S. economy becomes overheated so that equilibrium real GDP actually exceeds potential real GDP. Other things being equal, which of the following is likely to occur in the overheated U.S. economy?

a. Wages and other input prices will increase causing aggregate supply to decrease.

b. Wages and other input prices will decrease causing aggregate supply to increase.

c. The equilibrium price level will fall.

d. The equilibrium level of real GDP will increase.

e. Both C and D.

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