During an inflationary gap,
A)the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP.
B)real GDP is less than potential GDP.
C)the aggregate demand curve and the aggregate supply curve intersect at potential GDP.
D)the aggregate demand curve and the aggregate supply curve do not intersect.
E)the price level will fall to restore the long-run equilibrium.

Question

Quizplus · Accepted Answer

During an inflationary gap, the economy's actual output (real GDP) exceeds its potential output (potential GDP), indicating that the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that is higher than potential GDP.

During an Inflationary Gap