Chapter 6R, Problem 13MCQ

To determine

The correct option regarding the meaning of negative output gap.

Explanation of Solution

The discrepancy between an economy's actual output and its greatest possible output, given as a percentage of its gross domestic product, is known as the "output gap" (GDP). The production gap for a nation can be either positive or negative. A positive output signifies an economy that is beating expectations since its actual output is higher than the economy's acknowledged maximum capacity output, while a negative output gap shows that real economic output is below the economy's full potential for output.

Thus, from the above we can conclude that the correct option is D.