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A recessionary gap (sometimes referred to as a GDP gap) implies that:

a.Aggregate demand exceeds aggregate supply at the full-employment price level
b. Inventories are being depleted faster than producers desire
c. The unemployment rate is falling
d. Aggregate demand is less than aggregate supply at the full-employment price level

1 Answer

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Answer:

a. Aggregate demand exceeds aggregate supply at the full-employment price level

Step-by-step explanation:

  • A GDP is a measure of the economic gross domestic products seen in terms of outputs these gaps in GDP are due to the failures in order to create sufficient jobs for all those willing to work and is represented by the actual and potential long term GDP.
  • Thus the growth of aggregate demands outnumbers the aggregate supply possibly creating an inflation. This has consequences in the labor market and the economic potential, as the economy is not producing to its full potential.
  • Effects on the medical aid, food stamps and the insurance and tax rates of the country.
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