What typically characterizes an economy in a recessionary gap?

An economy in a recessionary gap is characterized by the underemployment of resources and decreased output. This situation occurs when actual output is significantly lower than potential output, indicating that the economy is not using its resources—such as labor and capital—efficiently. In a recession, businesses may reduce production due to decreased consumer demand, which leads to layoffs and higher unemployment rates. As a result, the economy operates below its full capacity, and overall output decreases. This underutilization of resources is a defining feature of a recessionary gap, illustrating the disconnect between actual economic activity and the economy's potential productivity. The other options describe conditions that are typically associated with economic growth or stability, which do not align with the reality of a recessionary gap.