If there is a recessionary gap in the economy, then it is producing _____ than its full employment level of output, and the government can follow _____ fiscal policy to close the gap.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the economy is producing less than its full employment level of output. An expansionary fiscal policy, which involves increasing government spending, cutting taxes, or both, can help close this gap by stimulating demand and increasing production.

If There Is a Recessionary Gap in the Economy, Then