If the economy is currently in a recessionary gap,the SRAS curve intersects the AD curve to the left of Natural Real GDP.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the economy is producing less than its potential level of output, which is represented by the Natural Real GDP. In this situation, the aggregate demand (AD) for goods and services is lower than the aggregate supply (AS) available in the economy, leading to a decrease in prices and wages in the short run. Hence, the short-run aggregate supply (SRAS) curve intersects the AD curve to the left of Natural Real GDP, indicating a contractionary output gap.

If the Economy Is Currently in a Recessionary Gap,the SRAS