If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, there is
A) an inflationary gap.
B) falling real GDP.
C) an above full-employment equilibrium.
D) a recessionary gap.
E) a rising price level.

Question

Quizplus · Accepted Answer

When the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, it indicates that the economy is not producing at its full capacity, leading to a recessionary gap. This gap reflects the difference between the actual output and the potential output of the economy.

If the Aggregate Demand Curve and the Aggregate Supply Curve