An equilibrium point beyond a potential GDP is termed as
A)deflationary gap.
B)recessionary gap.
C)inflationary gap.
D)acceleration gap.

Question

Quizplus · Accepted Answer

An equilibrium point beyond potential GDP indicates that the economy is operating above its full capacity, causing demand to exceed supply. This leads to a rise in prices and an increase in inflationary pressures, hence the term inflationary gap. A deflationary gap, on the other hand, indicates the economy is operating below its potential GDP, while a recessionary gap refers to a situation where the economy is experiencing a recession with high unemployment rates. An acceleration gap is not a commonly used term in macroeconomics.

An Equilibrium Point Beyond a Potential GDP Is Termed as