TYP: SA
Exhibit 14A-3 Macro AD-AS Model

-In Exhibit 14A-3,the level of real GDP associated with Y₁:
A) is equal to potential real GDP.
B) is an inflationary gap real GDP.
C) is a long-run equilibrium.
D) is caused by flexible wages and prices.

Question

TYP: SA
Exhibit 14A-3 Macro AD-AS Model
 
-In Exhibit 14A-3,the level of real GDP associated with Y₁:
A) is equal to potential real GDP. 
B) is an inflationary gap real GDP. 
C) is a long-run equilibrium. 
D) is caused by flexible wages and prices.

Quizplus · Accepted Answer

An inflationary gap occurs when the actual real GDP (Y₁) exceeds the potential real GDP, indicating that the economy is producing beyond its sustainable capacity, often leading to upward pressure on prices.

TYP: SA Exhibit 14A-3 Macro AD-AS Model