What is a recessionary gap in economics?

A recessionary gap in economics occurs when an economy is producing less than its potential output. This means that the actual level of economic activity, like the total goods and services produced, is lower than what could be achieved if all resources were fully utilized. For example, if a country can produce $1 trillion worth of goods and services but is only producing $900 billion, there is a $100 billion recessionary gap. This gap often leads to higher unemployment and lower consumer spending because businesses may cut back on hiring and production. Understanding this gap helps policymakers decide on measures, like increasing government spending, to stimulate the economy and close the gap.