An economic boom that creates an inflationary gap is usually followed later by

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Quizplus · Accepted Answer

An inflationary gap occurs when aggregate demand exceeds potential GDP, leading to rising prices. In order to bring inflation under control, the central bank may need to raise interest rates, which can lead to a slowdown in economic growth and potentially stagflation (a period of high inflation and low economic growth). Therefore, an economic boom that creates an inflationary gap is often followed by a period of stagflation. Choices A, C, and D are not necessarily true outcomes of an inflationary gap.

An Economic Boom That Creates an Inflationary Gap Is Usually