In an inflationary expenditure gap, the equilibrium level of real GDP is:
A) Greater than planned investment
B) Equal to full-employment GDP
C) Greater than full-employment GDP
D) Less than full-employment GDP

Question

Quizplus · Accepted Answer

In an inflationary expenditure gap, aggregate demand is higher than the economy's capacity to produce goods and services at full employment. As a result, the equilibrium level of real GDP will be greater than full-employment GDP as all available resources will be fully utilised and production will exceed the economy's potential output.

In an Inflationary Expenditure Gap, the Equilibrium Level of Real