The table below provides macroeconomic data for a hypothetical economy.Dollar amounts are all in constant-dollar terms. TABLE 19-1 Refer to Table 19-1.In which years was this economy experiencing a recessionary gap?
A)2015,2016
B)2012,2013,2017
C)2014,2018
D)2012,2013,2014
E)2016,2017,2018

Question

The table below provides macroeconomic data for a hypothetical economy.Dollar amounts are all in constant-dollar terms.  TABLE 19-1 Refer to Table 19-1.In which years was this economy experiencing a recessionary gap?
A)2015,2016 
B)2012,2013,2017 
C)2014,2018 
D)2012,2013,2014 
E)2016,2017,2018

Quizplus · Accepted Answer

A recessionary gap occurs when actual output is below potential output. We can calculate potential output by using the trend of real GDP growth over the years. From the table, we can see that the trend of real GDP growth was 5% from 2012 to 2014, and then decreased to 3% from 2015 to 2018. Thus, any year where the actual growth of real GDP was less than 3% can be considered a year of a recessionary gap. From the table, we can see that real GDP growth was less than 3% in 2012, 2013, and 2017, so the best choice would be B, which includes all of these years.

The Table Below Provides Macroeconomic Data for a Hypothetical Economy