When actual output equals potential output,there is ________ output gap and the rate of inflation will tend to ________.
A) an expansionary;increase
B) an expansionary;decrease
C) no;remain the same
D) a recessionary;increase
E) a recessionary;decrease

Question

Quizplus · Accepted Answer

When actual output equals potential output, there is no output gap. In this situation, the economy is operating at full capacity and there is no excess demand or supply of goods and services. Therefore, the rate of inflation will tend to remain the same.

When Actual Output Equals Potential Output,there Is ________ Output Gap