Inflation - The Output Gap and Inflation
3 important questions on Inflation - The Output Gap and Inflation
What happens when Y equals Y* in relation to inflation?
Inflation remains unchanged when Y equals Y*.
What occurs during an expansionary gap concerning output and inflation?
Output is greater than potential, causing inflation to rise. Y>Y*
What is the relationship between recessionary gaps and inflation?
Inflation falls when output is less than potential output. Y<Y*
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