Table 10-1
-In Table 10-1, if full employment occurs at $3,400 billion, then
A)the economy experiences a recessionary gap of $75 billion.
B)the economy experiences a recessionary gap of $150 billion.
C)the economy experiences an inflationary gap of $75 billion.
D)the economy experiences an inflationary gap of $150 billion.

Question

Table 10-1 
-In Table 10-1, if full employment occurs at $3,400 billion, then
A)the economy experiences a recessionary gap of $75 billion. 
B)the economy experiences a recessionary gap of $150 billion. 
C)the economy experiences an inflationary gap of $75 billion. 
D)the economy experiences an inflationary gap of $150 billion.

Quizplus · Accepted Answer

According to Table 10-1, full employment occurs at $3,400 billion. The potential GDP at full employment is $3,550 billion. Therefore, the actual GDP would be $3,400 billion if the economy is at full employment. However, the actual GDP at this point is given as $3,250 billion, which means that there is a recessionary gap of $150 billion ($3,400 billion - $3,250 billion = $150 billion).

Table 10-1 -In Table 10-1, If Full Employment Occurs at $3,400 Billion