A recessionary output gap implies that
A)the demand for all factor services will be relatively low.
B)the intersection of AD and AS occurs where real GDP exceeds potential output.
C)the economy's resources are being used at more than their normal capacity.
D)there is upward pressure on wages.
E)there is excess demand for most factors of production.

Question

Quizplus · Accepted Answer

A recessionary output gap occurs when actual economic output is less than the potential output of the economy, implying that the demand for factor services (such as labor and capital) is relatively low because the economy is not operating at full capacity.

A Recessionary Output Gap Implies That