An inflationary gap is occurs when
A) the economy is at full employment.
B) real GDP is less than potential GDP.
C) real GDP equals potential GDP.
D) real GDP exceeds potential GDP.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when real GDP exceeds potential GDP, which means that there is high demand for goods and services that exceeds the economy's capacity to produce them, leading to rising prices (inflation).

An Inflationary Gap Is Occurs When