Which one of the following could cause a recessionary gap?

Question

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A recessionary gap is a situation in which actual output in an economy is less than potential output. This can occur when price levels are too high, as it leads to a decrease in aggregate demand and a decrease in real GDP. Option A is incorrect because low interest rates typically stimulate economic growth and increase aggregate demand. Option B is incorrect because if consumers are spending more than they earn, it would increase their debts, leading to an increase in aggregate demand. Option D is incorrect as when businesses spend more than they save, it would lead to an increase in investment and aggregate demand.

Which One of the Following Could Cause a Recessionary Gap