inflationary gap


A description of a condition that arises in an economy of the difference between a country's real gross domestic product (GDP) and the level of GDP with full employment in the economy. The inflationary gap is so named because a rise in the level of an economy's GDP will cause an increase in consumption leading to higher prices.

Use inflationary gap in a sentence

  • You need to understand how the inflationary gap will work and try to find any ways to use it to your advantage.

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  • The inflationary gap was mentioned in the meeting as we were expecting an increase in employment so we could bridge the gap soon.

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  • When measuring the state of a nation's economy, investors cannot forget to take the inflationary gap into consideration before determining where best to place their funds.

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