Economics · Inflationary Gap
What is meant by an Inflationary Gap?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It is a situation which arises when Aggregate Demand falls short of Aggregate Supply at the full employment level.
- 2It is a situation where inflation rates increase hyper-exponentially without limit.
- 3It is a situation which arises when Aggregate Demand exceeds Aggregate Supply at the full employment level.✓
- 4It is a measure of central bank interest rate policy effectiveness.
Correct answer
It is a situation which arises when Aggregate Demand exceeds Aggregate Supply at the full employment level.
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