If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, there is
A)an inflationary gap.
B)an above full-employment equilibrium.
C)a rising price level.
D)a recessionary gap.
E)a falling real GDP.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the equilibrium level of real GDP is less than the potential GDP, indicating that the economy is operating below its full capacity.

If the Aggregate Demand Curve and the Aggregate Supply Curve