Respuesta :
A recessionary GDP gap is a horizontal distance between full employment, GDP, and equilibrium GDP.
What is the recessionary gap?
A recessionary gap is described as a difference between the potential GDP and the real GDP at the level of full employment. In other words, it can be highlighted as a gap between the full employment output and the actual production level, when the actual output level is below the natural output level.
During a recessionary gap, the unemployment rate increases. During a stage or phase of economic downturn, there is a low demand for services and goods, which leads to increased rates of unemployment. Furthermore, the situation worsens when the wages and prices remain the same. During a recessionary gap, the short-run equilibrium value is high. The business cycle contraction takes place during a recessionary gap.
It can be concluded that a recessionary GDP gap is a horizontal distance between full employment, GDP, and equilibrium GDP.
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