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Demand, Supply, and Equilibrium - Class XII
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______ refers to the situation when aggregate supply falls short of aggregate demand corresponding to full employment level of output in the economy.
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A
Inflationary Gap
💡 Explanation:
Inflationary gap is the excess of aggregate demand over and above
its level required to maintain full employment equilibrium in the
economy. It implies two things-
1) Planned aggregate demand in the economy happens to exceed its full employment level.
2) The level of aggregate demand surpasses the level of aggregate supply even when the available factors are fully utilized.