When the economy is producing output below potential, it has a(n):
A) full-employment output.
B) natural level of employment.
C) recessionary gap.
D) inflationary gap.

Question

Quizplus · Accepted Answer

When the economy is producing output below potential, it is operating in a recessionary gap, which means it is producing less than its potential and is experiencing high unemployment rates.

When the Economy Is Producing Output Below Potential, It Has