When the expenditure schedule is too high, the result is a(n)
A)unemployment surplus.
B)inflationary gap.
C)recessionary gap.
D)budgetary gap.

Question

Quizplus · Accepted Answer

When the expenditure schedule is too high, it leads to an inflationary gap. This occurs when the equilibrium level of real GDP is above the potential GDP due to excessive aggregate demand. This excess demand leads to price increases as firms raise prices to meet the demand, resulting in inflation.

When the Expenditure Schedule Is Too High, the Result Is