During an economic boom, (1) the actual rate of unemployment will exceed the natural rate of unemployment. (2) widespread unemployment will cause inflation to increase. (3) the actual rate of unemployment will equal the natural rate of unemployment. (4) the output of the economy will exceed its long-run potential output. (2)

During an economic boom, jobs are plentiful as businesses expand to meet rising consumer demand. People flood into the job market, often leading to a decrease in the actual rate of unemployment, sometimes even below the natural rate. However, as employers compete for a shrinking pool of job seekers, wages increase, which can contribute to inflation. In practice, this means that companies might face challenges in keeping up with the demand while managing costs efficiently. As wages rise and input costs increase, some businesses may pass those costs onto consumers, further fueling inflation rates and potentially leading to overheating in the economy. Balancing growth while controlling inflation is a critical tightrope act during boom times!