If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP greater than potential GDP, there is
A) a falling price level.
B) rising real GDP.
C) a below-full employment equilibrium.
D) an inflationary gap.
E) a recessionary gap.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when the actual level of real GDP is higher than the potential GDP, leading to upward pressure on prices due to demand outstripping supply.

If the Aggregate Demand Curve and the Aggregate Supply Curve