Recessionary Gap

Definition

A recessionary gap occurs when the actual level of output in an economy is below its potential level, resulting in high unemployment and underutilization of resources.

Related terms

Aggregate Demand: The total demand for goods and services in an economy at a given price level.

Fiscal Policy: Government actions related to taxation and spending aimed at influencing the overall economy.

Unemployment Rate: The percentage of the labor force that is actively seeking employment but unable to find jobs.