When actual output exceeds potential output, there is ______ output gap and the inflation rate will ____.
A)an expansionary; exceed the expected rate of inflation
B)an expansionary; be lower than the expected rate of inflation
C)no; be equal to the expected rate of inflation
D)a recessionary; exceed the expected rate of inflation

Question

Quizplus · Accepted Answer

When actual output exceeds potential output, it creates an expansionary output gap, leading to demand-pull inflation, where the inflation rate exceeds the expected rate of inflation.

When Actual Output Exceeds Potential Output, There Is ______ Output