Which of the Following Will Likely Happen If an Economy

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.