When an economy is experiencing a negative output gap,there is:
A)little inflationary pressure due to low demand.
B)little inflationary pressure due to high demand.
C)significant inflationary pressure due to low demand.
D)significant inflationary pressure due to high demand.

Question

Quizplus · Accepted Answer

A negative output gap refers to the difference between the potential output of the economy and the actual output, where the actual output is lower than the potential output. This indicates that there is insufficient demand in the economy, leading to lower prices and little inflationary pressure. Therefore, option A is correct, as there is little inflationary pressure due to low demand in the economy.

When an Economy Is Experiencing a Negative Output Gap,there Is