An inflationary gap is the amount by which
A) total planned production exceeds total planned real expenditures in the long run.
B) the short-run equilibrium level of nominal GDP is above the short-run level of real GDP.
C) the short-run equilibrium level of nominal GDP is below the short-run level of real GDP.
D) the short-run equilibrium level of real GDP is above the full-employment level of real GDP.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when the economy's total output exceeds its full-employment level of output, leading to upward pressure on prices due to high demand. This is represented by the short-run equilibrium level of real GDP being above the full-employment level of real GDP.

An Inflationary Gap Is the Amount by Which