Section: Principles of Macroeconomics

11) A recessionary gap exists when

1. aggregate supply exceeds aggregate demand.
2. the aggregate spending line intercepts the 45 degree line of an output level to the right of the full employment level of output
3. the aggregate spending line intercepts the 45 degree line of an output level to the left of the full employment level of output
4. the aggregate spending line intersects the aggregate supply curve at a lower price level.