Statement I.When there's a deflationary gap,equilibrium GDP is greater than full employment GDP.
Statement II: Full employment GDP is the level of spending necessary to purchase the output,or aggregate supply,of a fully employed economy.

Question

Quizplus · Accepted Answer

Statement I is false because a deflationary gap occurs when equilibrium GDP is less than full employment GDP, indicating underutilization of resources. Statement II is true as it correctly defines full employment GDP as the level of output when the economy's resources are fully utilized.