Changes in General Price Levels Due to Inflation or Deflation

question 5

Short Answer

Changes in general price levels due to inflation or deflation cause the ______________________________ of the monetary unit to increase or decrease ______________

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Definitions:

Expansionary Gap

A situation where real GDP exceeds potential GDP, often leading to inflationary pressures due to high demand in an economy.

Equilibrium Output

The level of output where the quantity of goods and services produced equals the quantity of goods and services demanded.

Expansionary Gap

A situation in macroeconomics where the actual output in an economy exceeds the potential output, traditionally leading to inflation.

Actual Price Level

The current market prices of goods and services, reflecting the real value of money and the purchasing power of consumers.