What do you understand by the inflationary gap?
1
It is a situation which arises when Aggregate demand in the economy falls short of Aggregate supply at the full employment level.
2
It is a situation when inflation rises at an extremely faster rate.
3
It is a situation which arises when Aggregate demand in an economy exceeds the Aggregate supply at the full employment level.
4
The mechanism through which the central banks controls inflation depends on interest rate.
5
Not Attempted