If AD AS at any level of output, then it will lead to inflationary trends in the economy, - Economics - Determination of Income and Employment

Question

If AD > AS at any level of output, then it will lead to
inflationary trends in the economy, However these can be corrected
and nullified by increasing AS and Matching AD provided that AD, AS
Hence NO inflationary Gap

On the Other hand, if AD > AS at full employment level then this
cant be corrected and nullified by changing (increasing) AS since
the economy is already operating at its full capacity In such case
AD needs to be reduced to match AS and this situation may lead to
INFLATIONARY GAP

AM I COORECT????

Shvetika Sharma · Accepted Answer

Dear student,
The explanation provided by you is correct The concept of
inflationary gap is explained in detail in our studymaterial You
can view the sane following the below mentioned path:

Class 12 - Economics- Macroeconomics- Income
determination