A recessionary gap refers to the:
A) amount by which the price level exceeds the equilibrium price level.
B) the amount by which actual GDP is less than potential GDP.
C) the amount by which actual GDP exceeds potential GDP.
D) increase in prices but not the output.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when actual GDP is less than potential GDP, indicating that the economy is not producing at its full capacity.

A Recessionary Gap Refers to The