ABSTRACT
Having analysed the conditions of full-employment equilibrium, we are in a position to proceed to the analysis of inflationary and deflationary gaps. For those gaps will be found emerging from effective demand exceeding or trailing inelastic short-run, full-employment output. Since the failures of the economy as a whole to wipe out inflationary and deflationary gaps result in unwanted price increases and unwanted output-employment decreases, it is important to analyse their emergence and the implied remedies therefor.
