Which of the following occurs if an economy experiences a recessionary gap? I. Actual real GDP is less than potential output.
II. Actual real GDP is greater than potential output.
III. Unemployment is less than the natural rate.
IV. Unemployment is greater than the natural rate.
A) I and III
B) I and IV
C) II and III
D) II and IV

Question

Quizplus · Accepted Answer

A recessionary gap occurs when actual real GDP is less than potential output, which corresponds to choice I. This means that the economy is not producing at its full potential, leading to high unemployment, which corresponds to choice IV. Therefore, the correct answer is B, as it includes both choices I and IV. Choices II and III do not accurately describe a recessionary gap.

Which of the Following Occurs If an Economy Experiences a Recessionary