A large negative output gap
A) represents a shortage of goods due to excessive demand for output
B) is the result of overtime work by the labor force
C) creates inflation
D) means the business cycle is at a peak
E) implies excessive unemployment

Question

Quizplus · Accepted Answer

A large negative output gap implies that the actual output of an economy is significantly below its potential output. This means that there is a significant amount of unused resources in the economy, including labor. As a result, there is typically a high level of unemployment associated with a negative output gap.

A Large Negative Output Gap