The recessionary GDP gap is
A)Equal to the spending multiplier.
B)The amount by which equilibrium GDP falls short of full-employment GDP.
C)Small unless the unemployment rate is very low.
D)Reduced by shifting aggregate demand to the left.

Question

Quizplus · Accepted Answer

The recessionary GDP gap is the amount by which equilibrium GDP falls short of full-employment GDP. This means that at equilibrium GDP, there is still unemployment and unused resources in the economy.

The Recessionary GDP Gap Is