If real GDP is $200 billion but potential GDP is $260 billion, there is a recessionary gap of $60 billion.

Question

Quizplus · Accepted Answer

A recessionary gap occurs when the real GDP is less than the potential GDP, indicating that the economy is not producing at its full capacity. In this case, the difference of $60 billion between the potential GDP ($260 billion) and the real GDP ($200 billion) represents the recessionary gap.

If Real GDP Is $200 Billion but Potential GDP Is