I’m having trouble understanding what a recessionary gap is and how it relates to a “recession”. From what I gather, a recession is when a nation is producing less (lower GDP) this quarter than it did in the previous quarter.
It says in the Schweser text that a recessionary GAP is when the GDP is lower than the “potential GDP”. Well if we go by that logic, isn’t there always a recessionary gap since we are never at 0% unemployment? If that’s true, how would you ever calculate potential GDP accurately?