An inflationary GDP gap is equal to the
A)Recessionary GDP gap.
B)Difference between equilibrium GDP and full-employment GDP.
C)Difference between potential GDP and full-employment GDP.
D)Increase in the price level caused by the inflation.

Question

Quizplus · Accepted Answer

An inflationary GDP gap occurs when the equilibrium GDP is greater than the full-employment GDP, leading to upward pressure on prices and inflationary pressures. Therefore, the correct answer is B, which is the difference between equilibrium GDP (inflationary GDP) and full-employment GDP. Option A refers to a situation where the actual GDP is less than the full-employment GDP leading to economic recession. Option C is the difference between potential GDP and full-employment GDP, which is the maximum capacity of an economy to produce goods and services, while option D is not related to the definition of an inflationary GDP gap.

An Inflationary GDP Gap Is Equal to the