Figure 9-1

In Figure 9-1, the economy is

Question

Figure 9-1

In Figure 9-1, the economy is

Quizplus · Accepted Answer

The horizontal distance EB represents the recessionary gap, as it shows the amount of output that is below potential GDP. The vertical distance between EF also indicates the recessionary gap, but it does not provide as clear of a measure as the horizontal distance. Option A is incorrect because an inflationary gap would be represented by a vertical distance above potential GDP. Option B is incorrect because the economy is not producing at full employment, as shown by the recessionary gap.

Figure 9-1 In Figure 9-1, the Economy Is