A recessionary GDP gap is the
A)Horizontal distance between full-employment GDP and equilibrium GDP.
B)Same as an inflationary gap.
C)Difference between leakages and injections.
D)Sum of leakages and injections.

Question

Quizplus · Accepted Answer

A recessionary GDP gap is the amount by which actual GDP falls short of potential GDP. This can be represented by the horizontal distance between full-employment GDP and equilibrium GDP on a graph. An inflationary gap, on the other hand, is the amount by which actual GDP exceeds potential GDP. Options C and D are not relevant to the concept of recessionary GDP gap.

A Recessionary GDP Gap Is the