Answer:
Difference between inflationary gap and deflationary gap are:
Two measures by which inflationary gap can be corrected: (i) Increase in bank rate (ii) Increase in repo rate Two measures by which deflationary gap can be corrected: (i) Decrease in bank rate (ii) Decrease in repo rate Basis Inflationary Gap Deflationary Gap Meaning The excess of aggregate demand above the level that is required to maintain full employment level of equilibrium is termed as inflationary gap. The short fall of aggregate demand below the level that is required to maintain full employment level of equilibrium is termed as deflationary gap. Effect on price level Inflationary gap causes inflation and increases wages and price level in the economy. Deflationary gap causes deflation and decreases wages and price level in the economy. Level of output Level of output is constant at full employment. Level of output is less than that at full employment. Level of employment There is no unemployment or underemployment in the economy. There is unemployment or underemployment in the economy.
You need to login to perform this action.
You will be redirected in
3 sec