What is a Contractionary Gap? - Identifying an Economy That is Below Potential

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

A contractionary gap occurs when which of the following occurs?

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1. When there is a downside gap between actual equilibrium, real GDP, and the full-employment level of real GDP, what do economists call this?

2. Which answer describes the image below?

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About This Quiz & Worksheet

Use this quiz and worksheet combination to test your comprehension of a contractionary gap. You will need to know how contractionary gaps are graphed and what a contractionary gap means for the short run.

Quiz & Worksheet Goals

Use this quiz to assess your ability to:

  • Define contractionary gap
  • Interpret a graphical representation of a contractionary gap
  • Describe what is true regarding graphical representations of contractionary gaps

Skills Practiced

This assessment will test the following skills:

  • Critical thinking - apply relevant concepts to examine information about economic downturns in a different light
  • Interpreting information - verify that you can read graphical representations of contractionary gaps and interpret it correctly
  • Distinguishing differences - compare and contrast short-run and long-run
  • Information recall - access the knowledge you've gained regarding contractionary gaps

Additional Learning

Review this lesson on 'What is a Contractionary Gap? Identifying an Economy That is Below Potential' to learn more. This lesson covers:

  • Defining the contractionary gap
  • Illustrating full employment level of output
  • Describing what happens to prices during a contractionary gap
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