An inflationary gap is the amount by which
A)potential GDP exceeds real GDP.
B)demand must increase to achieve full employment at a given price level.
C)supply must increase to achieve full employment at a given price level.
D)the price level must adjust to achieve full employment.
E)real GDP exceeds potential GDP.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when real GDP exceeds potential GDP, indicating that the economy is producing beyond its sustainable capacity, often leading to upward pressure on prices.

An Inflationary Gap Is the Amount by Which