Assertion (A): Excess demand at full employment leads to inflation.
Reason (R): At full employment, output cannot rise to meet the extra demand.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Only prices can adjust when output is at its limit. R explains A.

Concept: Why excess demand is inflationary
Typical timeTypical: 70 s
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The rule this testsExcess demand and the inflationary gap

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Assertion (A): Excess demand at full employment leads to inflation.Reason (R): At full employment, output cannot rise to meet the extra demand.

Explanation

Assertion (A): Excess demand at full employment leads to inflation.
Reason (R): At full employment, output cannot rise to meet the extra demand.