If the SRAS curve intersects the AD curve to the right of Natural Real GDP,the economy is
A) in a recessionary gap.
B) in either a recessionary gap or an inflationary gap,but we need more information to determine which one.
C) in an inflationary gap.
D) at full-employment Real GDP.

Question

Quizplus · Accepted Answer

If the SRAS curve intersects the AD curve to the right of Natural Real GDP, it means that there is an excess demand for output and resources are being stretched beyond their normal capacity. As a result, prices tend to rise, indicating inflationary pressures. Therefore, the economy is in an inflationary gap.

If the SRAS Curve Intersects the AD Curve to the Right