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Inflationary Gap

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Inflationary Gap
A situation in which the real GDP (GDP adjusted for inflation) exceeds the potential for what the economy can actually produce. This occurs when demand for products exceeds the labor or other resources required to produce them. Ultimately, this leads to demand-pull inflation.


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10) As a result, the inflationary gap has widened, which kept the annual inflation rate in a 40-50 percent range.
Here, both the monetarist model and the Keynesian inflationary gap model are in agreement.
 
 
 
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