Which of the following is true of a recessionary gap?
A)It develops when the expected price level is less than the actual price level.
B)In the long run,this gap closes when resource suppliers negotiate lower resource payments.
C)It measures the amount by which actual output is greater than the economy's potential output.
D)In the long run,this gap closes when the short-run aggregate supply curve shifts rightward.
E)In the long run,this gap closes when the aggregate demand curve shifts rightward.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when actual output is below the potential output of an economy. This means that there are unused resources in the economy. In the long run, as these unused resources become apparent, resource suppliers negotiate lower payments, which shifts the short-run aggregate supply curve to the right, closing the gap.

Which of the Following Is True of a Recessionary Gap