Difference between w inflationary gap and deflationary
Answers
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Inflationary Gap:
Inflationary gap is the amount by which the actual aggregate demand exceeds ‘aggregate supply at level of full employment’.
. It is a measure of the excess of aggregate demand over level of output at full employment. Inflationary gap causes a rise in price level which is called inflation.
Deflationary Gap:
Deflationary gap is the amount by which actual aggregate demand falls short of aggregate supply at level of full employment’
It is a measure of amount of deficiency of aggregate demand. Deflationary gap causes a decline in output, income and employment along with persistent fall in prices.
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Inflationary gap is the amount by which the actual aggregate demand exceeds aggregate supply at full employment level. ... Deflationary gap, on the other hand, is the amount by which the actual aggregate demand falls short of the aggregate supply at full employment level..