In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is
A)An inflationary gap of $25 billion income.
B)A recessionary gap of $50 billion income.
C)An inflationary gap of $50 billion income.
D)Expenditure equilibrium.

Question

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is 
A)An inflationary gap of $25 billion income. 
B)A recessionary gap of $50 billion income. 
C)An inflationary gap of $50 billion income. 
D)Expenditure equilibrium.

Quizplus · Accepted Answer

The gap between actual and full-employment GDP is the difference between the two, which is $50 billion (150-100). This is a recessionary gap because the actual GDP is less than the full-employment GDP, indicating that the economy is not utilizing all of its resources and is operating below its potential.