When the economy is at an above full-employment equilibrium, ____________.
A) a recessionary gap exists
B) nominal GDP exceeds real GDP
C) real GDP is less than potential GDP
D) an inflationary gap exists

Question

Quizplus · Accepted Answer

An above full-employment equilibrium means that the economy is already producing at a level beyond its potential. This means that there is a high demand for goods and services and the overall economy is growing rapidly. This situation leads to an inflationary gap as prices start to rise due to an excess in demand.

When the Economy Is at an Above Full-Employment Equilibrium, ____________