Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The maximum potential output of an economy
B
The current unemployment rate
C
The level of consumer confidence
D
The rate of inflation
Understanding the Answer
Let's break down why this is correct
Answer
A recessionary gap happens when an economy is not producing as much as it could, meaning there are unused resources like workers and factories. Similarly, a production possibilities frontier (PPF) represents the maximum output an economy can achieve with its available resources. Just as a recessionary gap shows inefficiency, the PPF illustrates the limits of production efficiency for an economy. For example, if a country can produce either 100 cars or 200 bikes but only makes 50 cars and 50 bikes, it is not using its resources efficiently, much like how a recessionary gap indicates underutilization. Therefore, both concepts highlight the importance of using resources fully to achieve better outcomes.
Detailed Explanation
A production possibilities frontier shows the most goods an economy can make. Other options are incorrect because Some might think the unemployment rate shows how well an economy is doing; People may confuse consumer confidence with economic efficiency.
Key Concepts
Recessionary gaps
Production possibilities curve (PPC)
Unemployment rate
Topic
Understanding Recessionary Gaps
Difficulty
hard level question
Cognitive Level
understand
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