-Refer to the graph in the exhibit.Consider income level Y₁.What type of gap is this?
A) a recessionary gap
B) an expansionary gap
C) a potential gap
D) an actual gap

Question

-Refer to the graph in the exhibit.Consider income level Y₁.What type of gap is this?  
A) a recessionary gap 
B) an expansionary gap 
C) a potential gap 
D) an actual gap

Quizplus · Accepted Answer

A recessionary gap occurs when the actual output in an economy is less than the potential output. This is typically represented on a graph where the current level of income or GDP (Y₁) is below the potential level of output, indicating that the economy is not utilizing all of its resources efficiently, leading to unemployment and underproduction.

-Refer to the Graph in the Exhibit