An inflationary gap exists when consumers
A)are saving more than businesses are investing.
B)and businesses are purchasing less than the economy is capable of producing.
C)and businesses are demanding more than the economy is capable of producing.
D)and businesses are demanding less than the full employment level of output.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when businesses are demanding more than the economy is capable of producing, leading to an increase in prices as demand outstrips supply.

An Inflationary Gap Exists When Consumers