Statement I.When there's an inflationary gap,equilibrium GDP is greater than full employment GDP.
Statement II: Full employment GDP is the level of spending necessary to purchase the output,or aggregate supply,of a fully employed economy.

Question

Quizplus · Accepted Answer

Both statements are true. An inflationary gap occurs when the equilibrium GDP exceeds the full employment GDP, indicating an economy operating beyond its sustainable capacity. Full employment GDP represents the total output when the economy is utilizing all its resources efficiently, aligning with the definition provided in Statement II.