The inflation gap can best be described as
A) the percentage difference between GDP and its potential.
B) the difference between inflation and its target.
C) the change in the inflation rate from one year to the next.
D) the difference between the inflation rate and the average inflation rate of that of the nations with the 3 lowest inflation rates.

Question

Quizplus · Accepted Answer

The inflation gap is the difference between the actual inflation rate and the rate targeted by a central bank or other policy-makers. This is often expressed as a percentage difference. Option A describes the output gap, while option C describes the inflation rate change. Option D describes a specific measure of inflation comparison, but not the inflation gap. Therefore, option B is the best choice as it accurately defines the inflation gap.

The Inflation Gap Can Best Be Described as