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When the economy is not close to it’s potential, price pressures (inflation) are a significant issue....

When the economy is not close to it’s potential, price pressures (inflation) are a significant issue. Group of answer choices True False

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Answer #1

It shall be noted that when the economy is not close to its potential, the gap been the existing level of output, and the potential level of output is called recessionary-gap.

Thus, the price pressure or inflation is not a significant issue as the economy advances to close this gap.

However, when the output level is greater than its potential level, the gap is called the inflationary gap. In this situation, price pressures (inflation) are a significant issue.

Hence, the correct answer is False

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