Part of the inflationary gap was closed by the success of Bevin in getting the trade unions to follow a voluntary pay policy.

Deflationary and inflationary gaps can be closed by discretionary monetary and/or fiscal policy.

The inflationary gap is always an ex-ante phenomenon, it is always expected to occur in the future.

He defined an inflationary gap as an excess of planned expenditure over the available output at pre-inflation or base prices.

An inflationary gap.

Friedman criticized the Keynesian inflationary gap on the grounds that gap analysis can be used only under special circumstances like wartime.

An inflationary gap, in economics, is the amount by which the actual gross domestic product exceeds potential full-employment GDP.

Thus Keynes used the concept of the inflationary gap to show the main determinants that cause an inflationary rise of prices.

The objective this time is to shift down the injections line or to shift up the withdrawals line by the full amount of the inflationary gap.

Discussion of the Inflationary Gap," American Economic Review Vol.

The concept of the inflationary gap was first given by John Maynard Keynes in his work How to Pay for War?

Keynes starts the analysis of the inflationary gap from the level of full employment equilibrium whereas his other analyses are based on under-employment equilibrium.

T.Koopmans introduced the idea of the speed of inflation, stating that the inflationary gap reduces as the speed of inflation falls.

When demand for goods exceeds supply there is an inflationary gap where demand-pull inflation occurs and the AD curve shifts upward to a higher price level.

Given a constant average propensity to save, rising: money incomes at full employment level would lead to an excess of demand over supply and to a consequent inflationary gap.

Despite these criticisms, the concept of inflationary gap has proved to be of much importance in explaining rising prices at full employment level and policy measures in controlling inflation.

Inflationary gap Now relax the assumption that wages and prices are fixed, and consider Fig. 10 which illustrates an inflationary gap.

The economy will be at the full employment level of output, but excess demand (equal to the inflationary gap) will still exist so that the general price level will be forced upwards.

Brazil's powerful Congress, controlled by opposition parties, shows little interest in approving tax bills and constitutional amendments intended to bridge a yawning, inflationary gap between Government receipts and Government obligations.

The once created gap between real GDP and potential GDP was the sign of forthcoming inflation, this is another reason this type gap is called an inflationary gap.

An inflationary gap is a signal that the economy is in the boom part of the trade cycle, resources are being used over their capacity, factories are operating with increasing average costs; wage rates increase because labour is used beyond normal hours at overtime pay rates.

Some of their ideas were shown to work; the counter-inflation programme (or at least that part of it which closed the inflationary gap from the fiscal end) was worked out by them and was a successful contrast to the experience of World War I. Yet by itself the explanation is inadequate.

Let the full employment output be Y and the actual output that the economy is currently producing be Y. If the difference Y - Y is negative, the actual national income exceeds the potential national income, which is known as the inflationary gap.

If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply-possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap-possibly signifying deflation.