This demand is more than the level of output produced at full employment level. This situation is called excess demand which leads to ...
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : Inflation
Excess demand implies that there is more demand for goods and services than the economy can produce at full employment. In such a situation, prices tend to rise as consumers and businesses compete for the limited available resources, leading to inflationary pressures in the economy.