Inflationary Gap Definition What is an inflationary gap? The terminflationary gapis defined as a macroeconomics concept that measures the difference between a country's projectedgross domestic product(GDP) with full employment and its actual GDP. The projected GDP with full employment is the maximum ...
Definition:An inflationary gap, also known as an expansionary gap, is the difference between the real GDP and the full-employment real GDP. In fact, the real GDP outweighs the full employment real GDP because an increase in the real GDP causes the general price level to rise in the long-...