When a recessionary gap occurs,

a. Real output exceeds the natural level of output, and unemployment exceeds its natural rate

b. Real output exceeds the natural level of output, and unemployment is less than its natural rate.

c. Real output is less than the natural level of output, and unemployment exceeds its natural rate.

d. Real output is less than the natural level of output, and unemployment is less than its natural rate.

Question

Business

Mattie

20 May, 17:06

When a recessionary gap occurs,

a. Real output exceeds the natural level of output, and unemployment exceeds its natural rate

b. Real output exceeds the natural level of output, and unemployment is less than its natural rate.

c. Real output is less than the natural level of output, and unemployment exceeds its natural rate.

d. Real output is less than the natural level of output, and unemployment is less than its natural rate.

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Answers (1)

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Mendoza · Answer 1

Answer: Real output is less than the natural level of output, and unemployment exceeds its natural rate. (C)

Explanation:

The recessionary gap is a term in macroeconomic which describes an economy that is operating at a level which is below its full-employment equilibrium. The recessionary gap is also known as a contractionary gap, it is the difference between the potential gross domestic product of a country at full employment and its current employment level which puts pressure on the price in the long run.

The recessionary gap is seen during economic downturn and usually associated with increase in unemployment.