PRC-3 · Chapter 13 · Question 3 of 50
If a country's Aggregate Demand intersects its Aggregate Supply curve at a point well below the full-employment level of output, the economy is suffering from a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Deflationary / Recessionary gap
Explanation
A deflationary (or recessionary) gap exists when the equilibrium level of national income is less than the potential full-employment level, leading to high unemployment.
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