Use the figure below to answer the following questions.

Figure 26.3.5
-Refer to Figure 26.3.5. At point B the economy has
A)an inflationary gap with real GDP in excess of potential GDP.
B)an inflationary gap with real GDP less than potential GDP.
C)a recessionary gap with real GDP in excess of potential GDP.
D)a recessionary gap with real GDP less than potential GDP.
E)neither an inflationary gap nor a recessionary gap.

Question

Use the figure below to answer the following questions.
  
Figure 26.3.5
-Refer to Figure 26.3.5. At point B the economy has
A)an inflationary gap with real GDP in excess of potential GDP. 
B)an inflationary gap with real GDP less than potential GDP. 
C)a recessionary gap with real GDP in excess of potential GDP. 
D)a recessionary gap with real GDP less than potential GDP. 
E)neither an inflationary gap nor a recessionary gap.

Quizplus · Accepted Answer

At point B, the economy has an inflationary gap because real GDP is greater than potential GDP, indicating that the economy is producing beyond its sustainable capacity.

Use the Figure Below to Answer the Following Questions