Refer to the following graphs for the following question.

-Which of the diagrams best reflects the existence of an inflationary gap?
A) A
B) B
C) C
D) D
E) E

Question

Refer to the following graphs for the following question.
 
-Which of the diagrams best reflects the existence of an inflationary gap?
A) A 
B) B 
C) C 
D) D 
E) E

Quizplus · Accepted Answer

An inflationary gap occurs when aggregate demand exceeds aggregate supply, leading to higher prices and inflation. Diagram A shows this situation, with the aggregate demand curve (AD) intersecting the aggregate supply curve (AS) at a point above the full-employment level of output (Yf).

Refer to the Following Graphs for the Following Question