A recessionary gap means that the level of real GDP at the short-run macroeconomic equilibrium
A) is less than full-employment GDP.
B) equals full-employment GDP.
C) is more than full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the actual level of real GDP is less than the full-employment level of GDP, indicating that the economy is not using all of its resources efficiently, particularly labor.

A Recessionary Gap Means That the Level of Real GDP