-In the above figure, if the economy is at point A, which of the following is true?
A) There is an inflationary gap.
B) Point A is the long-run equilibrium point.
C) There is a recessionary gap.
D) None of the above answers are correct.

Question

-In the above figure, if the economy is at point A, which of the following is true?
A) There is an inflationary gap. 
B) Point A is the long-run equilibrium point. 
C) There is a recessionary gap. 
D) None of the above answers are correct.

Quizplus · Accepted Answer

There is an inflationary gap at point A because the actual output (Y1) is less than the potential output (Yf).

-In the Above Figure, If the Economy Is at Point