If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP,there is
A)a recessionary gap.
B)an inflationary gap.
C)a rising price level.
D)a falling real GDP.
E)an above full-employment equilibrium.

Question

Quizplus · Accepted Answer

If the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP less than potential GDP, it means that the economy is producing less than its full potential. This situation is called a recessionary gap, as there is a gap between the actual output and the potential output. This indicates that the economy is in a recession or a slowdown, with high unemployment, low economic growth, and lower inflation.

If the Aggregate Demand Curve and the Aggregate Supply Curve