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Figure 3.20
-The figure above shows all of the following components except:
Potential GDP
The maximum output an economy can achieve when all resources are used efficiently and effectively, without causing inflation.
Cost-Push Inflation
Inflation that occurs when the prices of inputs such as labor and raw materials go up, causing a reduction in the supply of these products.
Expansionary Gap
A condition where an economy's real GDP exceeds its potential GDP, leading to inflationary pressures.
Recessionary Gap
A situation where the real Gross Domestic Product (GDP) is lower than the potential GDP, indicating an economy operating below its full capacity.
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