Suppose an Economy Is Experiencing an Expansionary Gap

Multiple Choice

Suppose an economy is experiencing an expansionary gap.Which of the following best characterizes what happens in such an environment?  

A)  Labour shortages drive up money wages, real wages, and prices. 
B)  An excess supply of labour results due to rising money wages and prices. 
C)  The economy will self-correct as rising money wages decrease faster than rising prices. 
D)  The economy will have excessive involuntary unemployment,
E) g., cyclical unemployment.