Economic Definition of inflationary gap. Defined.
Offline Version: PDF
Term inflationary gap Definition: The difference between the equilibrium real production achieved in the short-run aggregate market and full-employment real production the occurs when short-run equilibrium real production is more than full-employment real production. An inflationary gap, also termed an expansionary gap, is associated with a business-cycle expansion, especially the latter stages of an expansion. This is one of two alternative output gaps that can occur when short-run production differs from full employment. The other is a recessionary gap.
« aggregate expenditures determinant inflationary expectations | Keynesian model inflationary gap »
Permalink: https://glossary.econguru.com/economic-term/inflationary+gap