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Doctors Medicines MCQs Q&A

  1. Recessionary gap
  2. Inflationary gap
  3. Income multiplier
  4. Automatic stabilizer
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1 Answers

Option 2 : Inflationary gap

The correct answer is Option 2.

Inflationary gap

  • An inflationary gap exists when the demand for goods and services exceeds production due to factors such as higher levels of overall employment, increased trade activities, or elevated government expenditure.
  • Against this backdrop, the real GDP can exceed the potential GDP, resulting in an inflationary gap.
  • The amount by which the equilibrium level of real GDP exceeds the full employment level of GDP is called the Inflationary gap.

Recessionary Gap 

  • It can be defined as the difference between the real GDP and potential GDP at the full employment level. 
  • This is also known as the contractionary gap.
  • Real GDP is always outweighed by potential GDP because the economy’s aggregate output is always lower than the aggregate output that would be obtained at full employment.

 

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Related Questions

The question given below consists of a statement, followed by three arguments numbered I, II and III. You have to decide which of the arguments is/are ‘strong’ arguments and which is/are ‘weak’ arguments and accordingly choose your answer from the alternatives given below each question. Statement: Malaysia has set up a trust fund for the public to donate money in order to help the government repay the country's debt. Malaysia's Finance Ministry said the fund would be called Malaysia Hope Fund and the contributions must be made in cash. Will this help to gain financial stability Arguments: I. Yes, Malaysia's national debt amounts to $250.8 billion which is 80% of its GDP. II. No, Malaysia's debt amounts to $250.8 billion which is 8% of its national GDP. III. Yes, 80% of Malaysia's GDP amounts to a debt amount of about $250.8 billion.?
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