Which of the following occurs if an economy experiences a recessionary gap?
I. Actual real GDP is less than potential output.
II. Actual real GDP is greater than potential output.
III. Unemployment is less than the natural rate.
IV. Unemployment is greater than the natural rate.
A) I and III
B) I and IV
C) II and III
D) II and IV

Question

Quizplus · Accepted Answer

A recessionary gap occurs when actual real GDP is less than potential output, which is stated in choice I. Unemployment is also affected during a recessionary gap, as it increases and is typically greater than the natural rate, which is stated in choice IV. Therefore, the correct answer is B, which includes both I and IV.

Which of the Following Occurs If an Economy Experiences a Recessionary