Overview
Understanding recessionary gaps is crucial for analyzing economic performance. A recessionary gap occurs when actual output falls short of potential output, leading to unemployment and wasted resources. This gap can arise from various factors, including decreased consumer demand and reduced investme...
Key Terms
Example: An increase in consumer spending raises aggregate demand.
Example: Potential output is often estimated using historical data.
Example: A high unemployment rate indicates a recessionary gap.
Example: Increasing government spending can help reduce a recessionary gap.
Example: Lowering interest rates is a common monetary policy tool.
Example: GDP growth rate is a key economic indicator.
Related Topics
Business Cycle
The fluctuations in economic activity over time, including expansions and contractions.
intermediateInflation
The rate at which the general level of prices for goods and services rises.
intermediateEconomic Growth
The increase in the production of goods and services in an economy over time.
intermediateMonetary Policy Tools
The various methods used by central banks to control the money supply and interest rates.
advancedKey Concepts
Aggregate DemandPotential OutputUnemploymentEconomic Policy