Which of the following correctly describes the meaning of the expression Y Y*?
A)actual output is more than potential output - a recessionary gap
B)potential output is more than actual output - a recessionary gap
C)actual output is more than potential output - an inflationary gap
D)potential output is more than actual output - an inflationary gap

Question

Which of the following correctly describes the meaning of the expression Y > Y*?
A)actual output is more than potential output - a recessionary gap
B)potential output is more than actual output - a recessionary gap
C)actual output is more than potential output - an inflationary gap
D)potential output is more than actual output - an inflationary gap

Quizplus · Accepted Answer

Y represents actual output and Y* represents potential output. Y > Y* indicates that actual output is more than potential output which results in an inflationary gap.

Which of the Following Correctly Describes the Meaning of the Expression