The gap that exists when equilibrium real Gross Domestic Product (GDP) is less than full employment real Gross Domestic Product (GDP) is called a(n)
A) employment gap.
B) inflationary gap.
C) recessionary gap.
D) supply gap.

Question

Quizplus · Accepted Answer

The gap that exists when equilibrium real GDP is less than full employment real GDP is called a recessionary gap. This is because the economy is not operating at its full potential and is experiencing a downturn or recession. A, B, and D are incorrect choices because they do not accurately describe this specific type of gap.

The Gap That Exists When Equilibrium Real Gross Domestic Product