During an Inflationary Gap

question 294

Multiple Choice

During an inflationary gap,

• A)real GDP is less than potential GDP.
• B)the aggregate demand curve and the aggregate supply curve intersect at potential GDP.
• C)the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP.
• D)the aggregate demand curve and the aggregate supply curve do not intersect.
• E)the price level will fall to restore the long-run equilibrium.

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Definitions:

P

Typically refers to "Price" in economic models, representing the monetary value assigned to a good or service in the market.

V

Typically stands for Velocity in economic contexts, referring to the rate at which money circulates in the economy.

Monetary Policy

The process by which a central bank, like the Federal Reserve, controls the supply of money, often targeting an inflation rate or interest rate to ensure economic stability and growth.

Primary Growth

The initial stage of growth or expansion in an organism, market, or economic indicator, often characterized by rapid increases or significant changes.