An expansionary gap is equal to:
A)real GDP minus nominal GDP.
B)nominal GDP minus real GDP.
C)the actual short-run output minus potential output.
D)the actual price level minus expected price level.
E)the actual long-run real GDP minus actual short-run disposable income.

Question

Quizplus · Accepted Answer

An expansionary gap occurs when actual output exceeds potential output in the short run. This results in an increase in the price level and a deviation from the long-run equilibrium level of output. Therefore, the expansionary gap is equal to the actual short-run output minus potential output.

An Expansionary Gap Is Equal To