CAIE A-Level Economics 9.1.3 National Income Gaps

CAIE A-Level Economics 9.1.3 National Income Gaps
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise distinguishing equilibrium from full-employment income and calculating inflationary or deflationary expenditure gaps from Keynesian-cross or injections-withdrawals…

How this is tested

  • identify a deflationary gap when equilibrium income lies below full-employment income
  • identify an inflationary gap when planned spending would push demand beyond full-employment output
  • use the multiplier relationship to distinguish the expenditure gap from the resulting income gap

Question 15

[Maximum number: 1]

What leads to an inflationary gap?

A

Aggregate demand is greater than the maximum potential output of the economy.

B

Investment increases at a greater rate than profits received by a firm.

C

The economy is operating below its full capacity.

D

Innovation results in increased productivity in the economy.