An inflationary gap:
A) is generally regarded as desirable, especially by people living on a fixed income.
B) means that the economy is operating beyond its potential output.
C) means that there are pressures for wages to fall.
D) means that SRAS will soon shift rightward.

Question

Quizplus · Accepted Answer

An inflationary gap means that the actual output of the economy is higher than its potential output. This can lead to upward pressure on prices and inflation. While it may benefit some groups, such as those with fixed incomes, it is generally regarded as an undesirable state for the overall health of the economy. Choices A, C, and D are incorrect as they do not accurately describe an inflationary gap.

An Inflationary Gap