PRC-3 · Chapter 13 · Question 11 of 50
A country's macroeconomic equilibrium occurs at a point where Aggregate Demand intersects Aggregate Supply. If this intersection happens at an output level significantly below the nation's full-employment capacity, the economy is experiencing a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Deflationary / Recessionary gap
Explanation
A deflationary (recessionary) gap exists when the equilibrium level of real GDP is lower than the potential full-employment GDP, indicating high unemployment and unused resources.
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