When the economy produces less than its potential output, it is:
A) called a recession.
B) not in long-run equilibrium.
C) producing a quantity less than the long-run aggregate supply quantity.
D) All of these are true.

Question

Quizplus · Accepted Answer

When the economy is producing less than its potential output, it is in a state of recession, which means it is not in long-run equilibrium. This also means that the quantity produced is less than the long-run aggregate supply quantity. Therefore, all of these statements are true.

When the Economy Produces Less Than Its Potential Output, It