Which of the following is true when an economy produces at full employment,but consumers,government,businesses,and the foreign sector do not buy all the output?
A)Inventories are depleted.
B)There is a recessionary gap.
C)Unemployment falls.
D)The price level rises.

Question

Quizplus · Accepted Answer

When an economy produces at full employment but there is insufficient demand to purchase all the output, it leads to a situation where goods and services produced are not sold, causing inventories to build up. This situation is indicative of a recessionary gap, where actual production is less than what could be potentially produced at full employment, leading to downward pressure on prices and employment levels.

Which of the Following Is True When an Economy Produces