How is it possible for the economy to have a recessionary gap?
A)Equilibrium is at a GDP level below full employment.
B)Equilibrium is at a GDP level equal to full employment.
C)Equilibrium is at a GDP level above full employment.
D)GDP is rising at full employment.
E)GDP is falling at full employment.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the equilibrium level of GDP is below the full-employment level of GDP. This can happen due to a decrease in aggregate demand or a decrease in aggregate supply. The result is an economy that is not reaching its full potential and is experiencing high levels of unemployment.

How Is It Possible for the Economy to Have a Recessionary