Answer to Question #325236 in Macroeconomics for Macroeconomics

Question

Is there an inflationary or deflationary gap and what is the size?

Answer 1

The excess of aggregate demand above the level that is required to maintain full employment level of equilibrium is termed as inflationary gap.

The shortfall of aggregate demand below the level that is required to maintain full employment level of equilibrium is termed as a deflationary gap.