If an inflationary GDP gap exist, what will happen to business inventories. how will producers respond?

Anjaree

Since it has been above the production potential, inventories will make profits.

Brix

The inflationary gap exists when the demand for goods and services exceeds production due to factors such as higher levels of overall employment, increased trade activities or increased government expenditure. This can lead to the real GDP exceeding the potential GDP, resulting in an inflationary gap.