In a recessionary expenditure gap, the equilibrium level of real GDP is:
A) Less than planned aggregate expenditures
B) Greater than planned aggregate expenditures
C) Greater than full-employment GDP
D) Less than full-employment GDP

Question

Quizplus · Accepted Answer

In a recessionary expenditure gap, the level of real GDP is less than the full-employment GDP because there is insufficient demand for goods and services. This means that actual output is below the potential output, resulting in a shortfall in production and employment. Therefore, the correct option is D, which states that the equilibrium level of real GDP is less than full-employment GDP.

In a Recessionary Expenditure Gap, the Equilibrium Level of Real