In 2009,actual output in the U.S.was 4.7 percent below the potential output.This implies that the:
A)unemployment in the U.S.was below its natural rate.
B)poverty level in the U.S.was below average.
C)there was a recessionary gap in this economy.
D)there was an expansionary gap in this economy.
E)there was an excess demand in this economy.

Question

Quizplus · Accepted Answer

Potential output represents the output that would be produced by an economy operating at full employment, while actual output represents the real output produced by the economy. If actual output is less than potential output, it indicates that the economy is not operating at its full potential and that there is a recessionary gap. Therefore, the best choice is (C) - there was a recessionary gap in this economy.

In 2009,actual Output in the U