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-(Figure: Short-Run Equilibrium) Refer to Figure: Short-Run Equilibrium. It reflects a short-run inflationary gap. According to the labeling on the graph, the size of the inflationary gap is equal to:

Question

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-(Figure: Short-Run Equilibrium) Refer to Figure: Short-Run Equilibrium. It reflects a short-run inflationary gap. According to the labeling on the graph, the size of the inflationary gap is equal to:

Quizplus · Accepted Answer

The inflationary gap is the difference between the actual price level and the equilibrium price level. In this case, the actual price level is P2 and the equilibrium price level is P1. Therefore, the size of the inflationary gap is P2 - P1.

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