Refer to Figure 11.3.Assume aggregate demand is represented by AD₁ and full-employment output is $5.6 trillion.The economy confronts an inflationary GDP gap of

Question

Quizplus · Accepted Answer

The inflationary GDP gap is the difference between the actual output and the full-employment output. In this case, the actual output is at ADS1U1B0 which is $6 trillion and the full-employment output is $5.6 trillion. Therefore, the inflationary GDP gap is $400 billion ($6tn - $5.6tn). The correct answer is B.