📚 Learning Guide
Understanding Recessionary Gaps
easy

If Zeta's economy is in a recessionary gap, what might be a likely consequence of this situation?

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Choose the Best Answer

A

Increased production of consumer goods

B

Higher levels of unemployment

C

Decreased government intervention

D

Economic growth due to natural market adjustments

Understanding the Answer

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Answer

When Zeta's economy is in a recessionary gap, it means that the economy is not producing as much as it could, leading to higher unemployment and lower spending. People may lose their jobs or have less money to spend, which causes businesses to earn less. This can create a cycle where businesses cut back even more, leading to further job losses and reduced economic activity. For example, if a factory is not getting enough orders, it might lay off workers, which means those workers will spend less money in their community, hurting local shops. Overall, a recessionary gap can lead to a slowdown in economic growth and lower living standards for many people.

Detailed Explanation

In a recessionary gap, the economy is not producing enough goods and services. Other options are incorrect because Some might think that a recession means more goods are made; People might believe that the government does less during a recession.

Key Concepts

Recessionary Gaps
Unemployment Rates
Production Possibilities Curve
Topic

Understanding Recessionary Gaps

Difficulty

easy level question

Cognitive Level

understand

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