Asked by Dustin Hansen on May 21, 2024
Verified
A recessionary gap develops:
A) when actual output exceeds potential output.
B) when resource prices are "sticky" upward.
C) only when the economy is in recession.
D) only when GDP grows by more than 4 percent.
E) only when unemployment exceeds its natural rate.
Recessionary Gap
A situation where an economy's actual production is less than its potential output, often leading to unemployment and underused resources.
Potential Output
The level of productivity an economy can achieve with full employment and resources utilization, without causing inflation.
Natural Rate
The Natural Rate often refers to the natural rate of unemployment, where the unemployment rate is at a level expected in a fully efficient market without cyclical or short-term unemployment.
- Gain insight into the impact of shifts in aggregate demand and supply on prices and the quantity of goods produced.
Verified Answer
ND
Nkule DlaminiMay 26, 2024
Final Answer :
E
Explanation :
A recessionary gap occurs when actual output is less than potential output, which is often associated with unemployment exceeding its natural rate. This situation reflects underutilization of resources in the economy, leading to higher unemployment rates than what is considered natural or normal.
Learning Objectives
- Gain insight into the impact of shifts in aggregate demand and supply on prices and the quantity of goods produced.