Arrange the following steps in the correct order to illustrate the impact of an inflationary gap on the economy: A) Higher demand for labor leads to wage increases, B) Resource allocation exceeds full employment levels, C) Increased inflation expectations shift the short-run Phillips curve, D) Actual unemployment falls below the natural rate.

An inflationary gap occurs when the economy is producing more than its full capacity, leading to higher demand for goods and services. First, this increased demand causes resource allocation to exceed full employment levels, which is step B. As businesses need more workers to meet this demand, higher demand for labor leads to wage increases, which is step A. With wages rising, people expect prices to go up, shifting inflation expectations and impacting the economy, which corresponds to step C. Finally, this situation results in actual unemployment falling below the natural rate, which is step D.