Economics

Question

There is an inflationary gap when

Select one:

O A. real GDP is above potential GDP.

• B. potential GDP is above real GDP.

• C. real GDP per hour of labour is increasing.

O D. real GDP per person is increasing.

• E. potential GDP is increasing.

Answer

A. real GDP is above potential GDP.

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An inflationary gap occurs when real GDP is above potential GDP. This means that the economy is producing more than its potential output, leading to an increase...