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-(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. Which equation measures an inflationary gap?

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-(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. Which equation measures an inflationary gap?

Quizplus · Accepted Answer

An inflationary gap occurs when the actual output is greater than the potential output, leading to upward pressure on prices. In the given figure, the equation for measuring the inflationary gap is Y₃ - Y₂, as it represents the difference between the actual output (Y) at point A (Y₃) and the potential output (Y₂). Therefore, the best choice is B.

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