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Can You Explain The Inflationary And Deflationary Gaps?

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Anonymous answered
Explain the term inflationary gap and deflationary
Muhammad Abdullah786 Profile
When we look at the Keynes theory of income e and employment we came to know that the level of income and employment is determined where AD= AS. But such equilibrium level of NI does not necessarily represent full employment. According to Keynes:
The equilibrium level of NI may be at full employment. This situation occurs when at the level of full employment maximum level of NI permitted by the utilization of the entire human and natural resources of the economy aggregate demand is equal to aggregate supply.

The equilibrium level of NI may be at above full employment. This situation occurs when at the level of full employment aggregate demand is greater than aggregate supply. This situation corresponds to inflationary gap.The equilibrium level of NI may be at below full employment. This situation occurs when at the level of full employment aggregate demand is less than aggregate supply. This situation depicts deflationary gap.

With such brief review of inflationary and deflationary gaps, we move to explain these concepts, in addition to Keynes Ad and AS curves we will also modern AD and AS curves where we established relationship between price level and AD, price level and AS.
So in the equilibrium level AD= AS.
ordy kudawoo Profile
ordy kudawoo answered
10.  Suppose Rent-A-Truck's rates are $50 a day plus $0.50 per mile and Sam's you-Drive's
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B.  What is the cost?
C.  Under what conditions should one rent from Rent-A-Truck?

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13.  When Dale baby-sat for 8 hours and worked at a restaurant for 3 hours, he made a
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14.  Beth has saved $4500.  She would like to earn $250 per year by investing her money.
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B.  How much should Beth invest in each type of investment if she wishes to
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      length by 2 inches.  What are the dimensions of the picture?

16.  The steel braces for a new bridge are in the shape of a right triangle.  The hypotenuse
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17.  Maggie is 12 years old and Dwayne is 16.  How many years ago was Dwayne five
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18.  The sum of three numbers is -4.  The second number decreased by the third is equal
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