A Recessionary Gap Occurs When

question 297

Multiple Choice

A recessionary gap occurs when

• A) aggregate demand falls, but other things remain constant.
• B) short-run aggregate supply falls, but other things remain constant.
• C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve.
• D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve.

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Definitions:

Corporation

A legal entity that is separate and distinct from its owners, with rights to enter into contracts, loan and borrow money, sue and be sued.

Not-for-Profit

Organizations or institutions that do not operate for the purpose of making a profit but rather for a public benefit or a specific cause.

Profit Maximization

The process by which a firm determines the price and output level that returns the greatest profit.

Minimize Cost

The process of finding ways to use the smallest amount of resources or incur the lowest cost in producing goods or services.