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JAMB Economics 1993 Question 43

Question 43

National Income

Below equilibrium, the gap between aggregate demand and the full employment level of income is called the

  1. A.inflationary gap
  2. B.income gap
  3. C.unemployment gap
  4. D.deflationary gap
Show the answer and explanation

Answer: D (deflationary gap)

Explanation

When aggregate demand is too low to reach full-employment income, the shortfall is a deflationary gap.