An inflationary output gap implies that
A)the demand for all factor services will be relatively low.
B)the intersection of AD and AS occurs at real GDP below potential output.
C)the economy's resources are being used beyond their normal capacity.
D)there is a pressure for wages to decrease.
E)there is excess supply of most factors of production.

Question

Quizplus · Accepted Answer

An inflationary output gap occurs when actual output exceeds potential output, indicating that the economy's resources are being utilized beyond their normal capacity, leading to upward pressure on prices.

An Inflationary Output Gap Implies That