-Refer to the above figure. If the economy is currently operating at point C, then there is
A) deflation.
B) a recessionary gap.
C) an inflationary gap.
D) unemployment.

Question

-Refer to the above figure. If the economy is currently operating at point C, then there is
A) deflation. 
B) a recessionary gap. 
C) an inflationary gap. 
D) unemployment.

Quizplus · Accepted Answer

Point C represents an output level beyond the economy's potential GDP, indicating an inflationary gap where demand exceeds supply, leading to upward pressure on prices.

-Refer to the Above Figure