What is meant by an inflationary gap? State any two monetary measures to correct the situation of an inflationary gap.
a. An inflationary gap occurs when aggregate demand exceeds aggregate supply, leading to upward pressure on prices.
b. Monetary measures to correct an inflationary gap include increasing interest rates and reducing the money supply.
c. Monetary measures to correct an inflationary gap include decreasing interest rates and increasing government spending.
d. Both a and b.