Which of the following most likely occurs when an inflationary gap exists?
A)A bidding war for available goods and services.
B)More layoffs.
C)Rising inventories.
D)Excessive saving.

Question

Quizplus · Accepted Answer

An inflationary gap occurs when the actual level of output exceeds the economy's potential output at full employment, leading to a shortage of goods and services. This can trigger a bidding war as demand for goods and services exceeds supply, leading to an increase in prices and inflationary pressures.

Which of the Following Most Likely Occurs When an Inflationary