explain inflationary gap
Understand the Problem
The question is asking for an explanation of the inflationary gap, which is an economics concept that refers to the difference between the actual output of an economy and its potential output when the economy is operating above its full capacity. To solve it, we will define the inflationary gap, explain its causes and implications, and discuss its relationship to aggregate demand and supply.
Answer
The difference between actual GDP and potential GDP at full employment.
An inflationary gap is the positive difference between an economy's actual GDP and its potential GDP at full employment, causing prices to rise due to too much demand for available goods and services.
Answer for screen readers
An inflationary gap is the positive difference between an economy's actual GDP and its potential GDP at full employment, causing prices to rise due to too much demand for available goods and services.
More Information
An inflationary gap often results when demand in the economy exceeds supply, leading to higher overall prices.
Sources
- Inflationary Gap - Investopedia - investopedia.com
- Inflationary Gap - Economics Online - economicsonline.co.uk
- Inflationary Gap - Definition, Formula, Examples - https:
