PRC-3 · Chapter 13 · Question 31 of 50
If a country's aggregate demand intersects its aggregate supply curve at an output level far below the full-employment level, leaving millions unemployed, the economy is suffering from a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Deflationary / Recessionary gap
Explanation
A deflationary (recessionary) gap represents the shortfall in aggregate demand required to push the economy to its full-employment potential.
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