In 2000, many economists believed that the most serious macroeconomic problem confronting the u. s. economy was an inflationary gap. Which policies would be effective in dealing with this problem?

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03-08-2022
Business

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In 2000, many economists believed that the most serious macroeconomic problem confronting the u. s. economy was an inflationary gap. Which policies would be effective in dealing with this problem?

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smecloudbird17 smecloudbird17 · Answer 1 · 2022-08-17T12:53:21-04:00

Increase in personal income taxes, reductions in government spending

Some other policies that can reduce an inflationary gap include tax increases, bond and securities issues, interest rate increases and transfer payment reductions.

The inflation rate in U.S. in 2000 was 3.36%. The 2000 inflation rate is higher compared to the average inflation rate of 2.50% per year between 2000 and 2022.

An Inflationary gap is that concept of macroeconomics that measures the difference between the current level of real gross domestic product i.e. real GDP and the gross domestic product (GDP) that would exist if an economy was operating at it's full employment.

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