When there is a recessionary gap in the economy,what is happening to real output in relation to the natural level of output?
A)Real output may exceed or may be less than the natural level of output.
B)Real output is less than the natural level of output.
C)Real output is equal to the natural level of output.
D)Real output exceeds the natural level of output.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when real output is less than the natural level of output, which represents the economy's potential output when all resources are utilized efficiently. This means that there is an economic downturn or recession, with higher unemployment rates and lower production levels than what is possible in the long run. Therefore, the correct choice is B, where real output is less than the natural level of output.

When There Is a Recessionary Gap in the Economy,what Is