An inflationary gap exists when AD and SRAS
A) fail to intersect.
B) intersect to the right of Natural Real GDP.
C) intersect to the left of Natural Real GDP.
D) both have a positive slope.

Question

Quizplus · Accepted Answer

An inflationary gap exists when AD and SRAS intersect to the right of Natural Real GDP. This means that demand is higher than the economy's ability to supply goods and services. As a result, prices increase and there is upward pressure on inflation.

An Inflationary Gap Exists When AD and SRAS