A recessionary gap means that short-run macroeconomic equilibrium GDP
A) is less than full-employment GDP.
B) equals full-employment GDP.
C) is more than full-employment GDP.
D) may be less than, more than, or the same as full-employment GDP depending on the level of potential GDP.

Question

Quizplus · Accepted Answer

A recessionary gap is a situation where the equilibrium level of GDP is less than the full-employment level of GDP, meaning there are unused resources in the economy. This indicates an underutilized economy, with a high level of unemployment and low level of economic growth.

A Recessionary Gap Means That Short-Run Macroeconomic Equilibrium GDP