A recessionary gap implies that
A)Aggregate demand is less than aggregate supply at the full-employment price level.
B)The unemployment rate is falling.
C)Aggregate demand exceeds aggregate supply at the full-employment price level.
D)Inventories are being depleted faster than producers desire.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the economy is producing below its potential level of output, resulting in a situation where aggregate demand is less than aggregate supply at the full-employment price level. This leads to unemployment and possibly a decrease in prices. Therefore, option A is the correct choice.

A Recessionary Gap Implies That