When an economy is experiencing a negative output gap, it means that the:
A) actual output is less than their potential output.
B) actual output is more than their potential output.
C) price level is rising.
D) price level is falling.

Question

Quizplus · Accepted Answer

A negative output gap means that the actual output of an economy is less than its potential output. This can lead to unemployment and decreased economic activity.

When an Economy Is Experiencing a Negative Output Gap, It