-An inflationary gap means that the level of real GDP at the short-run macroeconomic equilibrium
A) is less than full-employment GDP.
B) equals full-employment GDP.
C) is more than full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question

-An inflationary gap means that the level of real GDP at the short-run macroeconomic equilibrium
A) is less than full-employment GDP. 
B) equals full-employment GDP. 
C) is more than full-employment GDP. 
D) may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Quizplus · Accepted Answer

An inflationary gap occurs when the level of real GDP in the short-run macroeconomic equilibrium is greater than the full-employment level of GDP, leading to upward pressure on prices due to the high demand relative to supply.

-An Inflationary Gap Means That the Level of Real GDP