Does an expansionary gap or a recessionary gap exist if short-run output is $18.0 trillion and potential output is $18.2 trillion?
A) an expansionary gap
B) a recessionary gap
C) both an expansionary gap and a recessionary gap
D) neither an expansionary gap nor a recessionary gap
E) The actual gap is equal to potential output.

Question

Quizplus · Accepted Answer

Since short-run output is lower than potential output, there is a gap between the actual and potential output, which is a recessionary gap.

Does an Expansionary Gap or a Recessionary Gap Exist If