When actual output exceeds potential output there is ________ output gap and the rate of inflation will tend to ________.
A)an expansionary; increase
B)an expansionary; decrease
C)no; remain the same
D)a recessionary; increase

Question

Quizplus · Accepted Answer

If there is an expansionary output gap, the economy is above full-employment equilibrium. In this case there is a tendency for inflation to increase.

When Actual Output Exceeds Potential Output There Is ________ Output