A recessionary gap is the amount by which
A)the price level must adjust to achieve full employment.
B)potential GDP exceeds real GDP.
C)real GDP exceeds potential GDP.
D)potential GDP must increase to achieve full employment at a given price level.
E)aggregate demand will increase to achieve full employment at a given price level.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when potential GDP (the level of GDP attainable when the economy is at full employment) exceeds real GDP (the current level of output). This indicates that the economy is not utilizing all of its resources efficiently, leading to unemployment above the natural rate.

A Recessionary Gap Is the Amount by Which