An economy that is operating below its full-employment capacity is experiencing a(n):
A)tax-induced recession.
B)recessionary gap.
C)fiscal drag.
D)market correction.
E)inflationary gap.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the economy is operating below its full-employment capacity. This means that there is a gap between the actual output of the economy and the potential output that could be produced if all resources were fully employed.

An Economy That Is Operating Below Its Full-Employment Capacity Is