An Inflationary Gap Is Created When

question 203

Multiple Choice

An inflationary gap is created when

• A)real GDP is greater than potential GDP.
• B)real GDP equal to potential GDP.
• C)the inflation rate is less than potential inflation.
• D)the price level exceeds the equilibrium price level.
• E)potential GDP is greater than real GDP.

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Definitions:

Absolute Value

The non-negative value of a number without regard to its sign.

Slope

In mathematics and economics, the measure of the steepness or incline of a line, indicating the rate of change of one variable with respect to another.

Indifference Curves

A graph showing different bundles of goods between which a consumer is indifferent, illustrating preferences and trade-offs.

Budget Constraint

The constraint on the collection of goods or services a consumer is able to purchase, determined by their income and the cost of those goods or services.