Analyzing an Overheating Economy

In an economy where the unemployment rate is exceptionally low, leading to strong competition for labor, which of the following best analyzes the process that typically results in sustained price increases?

An economy is experiencing a period of very low unemployment, putting it in a situation where the total desired income of workers and firms exceeds the value of the goods and services being produced. Arrange the following events into the logical sequence that describes the resulting inflationary cycle.

The Inherent Conflict in a Full-Employment Economy

In an economy with very low unemployment, it is possible for both workers to achieve their desired increase in real wages and for firms to achieve their desired profit margins simultaneously, as long as firms absorb the higher labor costs without raising prices.