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Explain the concept of infaltionary gap Explain therole of Repo Rate in reducing this gap.

Class 12 Economics in Class 12 3 years ago

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Solution :An inflationary gap is a macroeconomic concept that describes the difference between the current level of real gross DOMESTIC product (GDP) and the anticipated GDP that would be experienced if an economy is at full employment. This is ALSO referred to as the potential GDP. With an increase in the REPO rate, the market interest rates will rise too. This will lead to a decrease in consumption and investments, and ULTIMATELY a reduction in the demand. This will eventually lead to a decrease in the rate of inflation.
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Posted on 11 Dec 2021, this text provides information on Class 12 related to Economics in Class 12. Please note that while accuracy is prioritized, the data presented might not be entirely correct or up-to-date. This information is offered for general knowledge and informational purposes only, and should not be considered as a substitute for professional advice.

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