When there is an inflationary gap:
A)Employment exceeds full employment.
B)Employment equals full employment.
C)Employment is less than full employment.
D)Any of the above is possible.

Question

When there is an inflationary gap:
A)​Employment exceeds full employment.
B)​Employment equals full employment.
C)​Employment is less than full employment.
D)​Any of the above is possible.

Quizplus · Accepted Answer

An inflationary gap occurs when the demand for goods and services exceeds production at full employment, leading to an increase in prices. This situation often results in employment levels that exceed the full employment level, as firms increase output to meet the higher demand, thereby hiring more workers.

When There Is an Inflationary Gap