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Distinguish between inflationary gap and deflectionary gap .State two measures.

Posted by Vijay Chauhan 4 years, 6 months ago

CBSE > Class 12 > Economics

1 answers

Sia ? 4 years, 6 months ago

Inflationary Gap:

Inflationary gap is the amount by which the actual aggregate demand exceeds ‘aggregate supply at level of full employment’.
It is a measure of the excess of aggregate demand over level of output at full employment. Inflationary gap causes a rise in price level which is called inflation.

Deflationary Gap:

Deflationary gap is the amount by which actual aggregate demand falls short of aggregate supply at level of full employment’
It is a measure of amount of deficiency of aggregate demand. Deflationary gap causes a decline in output, income and employment along with persistent fall in prices.

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