Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the ACCA Certification Exam with interactive quizzes and detailed explanations. Get a head start on your success with our comprehensive study tools.

Start Multiple Choice Practice Test
Start Flash Cards

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What typically happens to prices during an inflationary gap?

  1. Prices decrease significantly

  2. Prices remain stable

  3. Prices tend to rise

  4. Prices decrease to encourage spending

The correct answer is: Prices tend to rise

During an inflationary gap, economic activity is higher than the economy's potential output. This situation typically occurs when demand for goods and services exceeds supply, which places upward pressure on prices. As consumers and businesses compete for limited resources, the increased demand leads to higher prices for goods and services in the economy. Therefore, it is common to see a trend where prices tend to rise during an inflationary gap, reflecting the excess demand in relation to supply.

More Questions Like This