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Suppose an economy is in an inflationary gap. What can we infer about the unemployment rate?...

  1. Suppose an economy is in an inflationary gap. What can we infer about the unemployment rate?

  1. It is above 4.5%

  2. It is equal to 4.5%

  3. It is below 4.5%


  1. Draw a graph with SRAS and AD that is operating at the short-run equilibrium AND in an inflationary gap. What must be true?

    1. RGDP produced = RGDP consumed

    2. RGDP produced > RGDP consumed

    3. RGDP produced < RGDP consumed


  1. Draw a graph with SRAS and AD that is operating at the short-run equilibrium AND in an inflationary gap. What must be true?

  1. Actual RGDP = Natural RGDP

  2. Actual RGDP > Natural RGDP

  3. Actual RGDP < Natural RGDP


  1. Draw a graph with SRAS and AD that is operating at the short-run equilibrium AND in an inflationary gap. What must be true?

  1. Actual unemployment rate = Natural unemployment rate

  2. Actual unemployment rate > Natural unemployment rate

  3. Actual unemployment rate < Natural unemployment rate

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Answer #1

2. The correct answer is C. RGDP produced < RGDP consumed.

3. The correct answer is b. Actual RGDP > Natural RGDP

BECAUSE in the above diagram actual RGDP is Y1 and natural RGDP is Y0

4. The correct answer is C. Actual unemployment rate < natural unemployment rate.

Reason = as we know natural unemployment is always present in the economy, but when there is inflationary gap in the economy the employment rate increases due to which the actual unemployment rate is less than natural unemployment rate.

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