Question

The difference by which actual Aggregate Demand exceeds the Aggregate Demand, required to establish full employment equilibrium is known as ______

Options

• Inflationary gap

• Deflationary gap

• Either the Inflationary gap or the Deflationary gap

• Neither Inflationary gap nor Deflationary gap

Answer 1

The difference by which actual Aggregate Demand exceeds the Aggregate Demand, required to establish full employment equilibrium is known as the Inflationary gap.

Explanation:

It calculates the difference between the current level of real GDP and the GDP that would exist if an economy was fully employed.