A recessionary gap exists when:
A)aggregate demand exceeds output.
B)actual output exceeds potential output.
C)output exceeds aggregate demand.
D)potential output exceeds actual output.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when potential output (what the economy could produce if it were operating at full capacity) exceeds actual output (what the economy currently produces). This indicates that the economy is not utilizing all of its resources efficiently, often leading to higher unemployment rates.

A Recessionary Gap Exists When