Share This Article:

Economic Definition of Keynesian model inflationary gap. Defined.

Offline Version: PDF

Term Keynesian model inflationary gap Definition: The difference between equilibrium aggregate production achieved in the Keynesian model and full-employment aggregate production that occurs when equilibrium aggregate production is greater than full-employment aggregate production. An inflationary gap, also termed an expansionary gap, is associated with a business-cycle expansion. The prescribed Keynesian remedy for an inflationary gap is contractionary fiscal policy. This is one of two alternative output gaps that can occur when equilibrium generates production that differs from full employment. The other is a recessionary gap.

 

« inflationary gap | inflexible prices »

Permalink: https://glossary.econguru.com/economic-term/inflationary+gap,+Keynesian+model

Alphabetical Reference to Over 2,000 Economic Terms