-Refer to the graph above to answer this question.If this economy is experiencing a recessionary gap,which of the following could be correct? A)Real GDP is Y₁ and there is a budget deficit. B)Real GDP is Y₁ and there is a budget surplus. C)Real GDP is Y₂ and there is a balanced budget. D)Real GDP is Y₁ and there is a balanced budget.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when actual GDP is less than potential GDP, leading to underutilization of resources and often resulting in a budget deficit due to lower tax revenues and higher government spending to stimulate the economy.

-Refer to the Graph Above to Answer This Question