Which of the following statements best describes the term inflationary gap?
1
It is the gap between price levels of the base year and the current year.
2
It is a situation that arises when aggregate demand exceeds the aggregate supply at the full employment level.
3
It is a situation when inflation rises at a faster rate highlighting gaps in monetary policy transmission.
4
It is a situation that arises when aggregate demand falls short of aggregate supply at the full employment level.
5
It is a situation when inflation is lowered down and economy is reviving