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Assume that the economy is operating at nearly full capacity. The initial results of an oversupply of money are most likely to have the greatest impact on which of the following macroeconomic factors?
When an economy operates near full capacity, additional money in circulation leads to inflation, as demand exceeds the economy's ability to increase supply.
B is correct because inflation is the primary impact when supply cannot keep up with excess demand.
A is incorrect because output does not significantly increase when capacity is already maximized.
C is incorrect because velocity measures the rate at which money circulates, not the impact of oversupply.
D is incorrect as unemployment is already low when the economy is at full capacity.
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