Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Decrease in aggregate demand
B
Increase in consumer spending
C
Rise in aggregate supply
D
Government investment in infrastructure
Understanding the Answer
Let's break down why this is correct
Answer
A recessionary gap occurs when the total goods and services produced in an economy, known as aggregate supply, is less than what people want to buy at full employment. This usually happens when there is a decrease in demand for products and services, leading businesses to cut back on production and lay off workers. For example, if many people stop buying cars, car manufacturers will produce fewer vehicles, which can lead to job losses in that industry. As a result, the overall economy slows down, and the gap between what is produced and what is needed widens. In simple terms, a recessionary gap shows that the economy is not using its resources efficiently, leading to unemployment and lower economic growth.
Detailed Explanation
A recessionary gap happens when people buy less stuff. Other options are incorrect because Some might think that if people spend more, the economy will grow; It's easy to think that more supply means a better economy.
Key Concepts
aggregate supply
Topic
Understanding Recessionary Gaps
Difficulty
easy level question
Cognitive Level
understand
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