A recessionary gap means that short-run macroeconomic equilibrium GDP
A) equals full-employment GDP.
B) is less than full-employment GDP.
C) is more than full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the short-run equilibrium level of GDP is less than the full-employment level of GDP. This means there is a deficiency in aggregate demand, leading to unemployment and underutilization of resources.

A Recessionary Gap Means That Short-Run Macroeconomic Equilibrium GDP