When the difference between potential GDP and actual GDP increases, the nation usually suffers from increased inflation.

Name: When the difference between potential GDP and actual GDP increases, the nation usually suffers from increased inflation.
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When the difference between potential GDP and actual GDP increases, there is usually a decrease in inflationary pressure because there is less demand for goods and services. This is known as a recessionary gap.

When the Difference Between Potential GDP and Actual GDP Increases