How does an inflationary gap occur?
What will be an ideal response?
If desired spending in the economy exceeds the output available at full employment, inventories become depleted. As businesses and consumers compete for the available goods and services, prices and wages are bid up. This causes an inflationary gap. As a result, nominal GDP will increase because of the higher prices or inflation.
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Why do economists believe that it is socially optimal to have some amount of pollution?
What will be an ideal response?
Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. The nominal GDP for year 4 is:
a) $49. b) $55. c) $40. d) $35.
Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?
A. $300 decrease in taxes. B. $75 increase in government spending. C. $75 decrease in taxes. D. $75 decrease in government spending.
Adverse aggregate-supply shocks or stagflation would cause a:
A. Movement up along a stable Phillips Curve B. Movement down along a stable Phillips Curve C. Shift of the Phillips Curve to the left D. Shift of the Phillips Curve to the right