Question

In an economy, when ______ is insufficient to achieve the level of output corresponding to the full employment, the difference is termed a deflationary gap.

Options

• ex-ante Aggregate Demand

• ex-post Aggregate Demand

• ex-ante Aggregate Supply

• ex-post Aggregate Supply

Answer 1

In an economy, when ex-ante Aggregate Demand is insufficient to achieve the level of output corresponding to the full employment, the difference is termed a deflationary gap.

Explanation:

In macroeconomics, the deflationary gap occurs when the ex-ante Aggregate Demand (planned spending) is less than the Aggregate Supply required to achieve full employment.