A recessionary gap is the amount by which
A) total planned real expenditures exceed total planned production in the long run.
B) the short-run equilibrium level nominal GDP is above the short-run real GDP.
C) the short-run equilibrium level nominal GDP is below the short-run real GDP.
D) the short-run equilibrium level of real GDP is below the full-employment level of real GDP.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the short-run equilibrium level of real GDP is below the full-employment level of real GDP, which is the level of output that would be produced if all resources were fully employed. This indicates that the economy is not producing at its maximum potential and is experiencing lower levels of employment and output than it could.

A Recessionary Gap Is the Amount by Which