When no output gap exists,actual output _________ potential output and the rate of inflation will tend to __________.
A) is greater than;increase
B) is greater than;decrease
C) equals;remain the same
D) is less than;increase
E) is less than;decrease

Question

Quizplus · Accepted Answer

When actual output equals potential output, there is no output gap, and the economy is operating at full capacity. In this situation, there is no upward or downward pressure on prices, and the rate of inflation is likely to remain stable. Therefore, the answer is C, equals; remain the same.

When No Output Gap Exists,actual Output _________ Potential Output and the Rate