Question

distinguished between inflonationary gap and deflationary gap show deflationary gap on a diagram can this gap exists at equilibrium level of income?​

Answer 1

Answer:

Yes, deflationary gap can exist at equilibrium level of income. In the below figure equilibrium is attained at a equilibrium point E,, when deflationary gap is EB. Answer: Inflationary gap is the gap showing excess of current aggregate demand over 'aggregate supply at the level of full employment'.

Explanation:

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