An Inflationary Gap

question 73

Multiple Choice

An inflationary gap

• A) exists when actual spending is less than intended spending.
• B) measures the additional intended spending needed to ensure full employment.
• C) indicates the additional spending needed to lower the rate of inflation.
• D) measures the increase in GDP needed to achieve full employment.
• E) can be eliminated by fiscal policies designed to shift the aggregate demand curve to the left.

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Definitions:

Inflation Rate

The rate at which the general level of prices for goods and services is rising, subsequently eroding purchasing power.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the individual values in a data set differ from the mean.

Standard Deviation

Standard deviation is a statistical measure of the dispersion or variability of a set of data points around the mean.

Expected Return

The average of all possible returns from an investment, weighted by their respective probabilities.