Recessionary gaps occur when the actual level of real GDP is:

A recessionary gap occurs when the actual level of real GDP is less than the full-employment level of GDP. This situation illustrates the economy's underperformance, where resources, particularly labor, are not being used to their fullest potential. In other words, when the actual output is below what the economy could produce if operating at full capacity, it indicates that there is unemployment and underutilization of capital.

This concept highlights the difference between potential GDP, which represents the maximum sustainable output of an economy at full employment, and the actual output measured by real GDP. In a recessionary gap, the lower real GDP reflects decreased demand for goods and services, often resulting in increased unemployment and an overall decline in economic activity. Thus, understanding the relationship between actual GDP and the full-employment level is crucial for analyzing economic conditions and policy responses.