When equilibrium GDP is too small, we have \- (LO1) a) a recessionary gap c) an inflationary gap b) a depression d) none of these

In order to determine which answer is correct, we must understand what the options mean: a) A recessionary gap: This occurs when an economy's equilibrium output level is lower than its potential output level. It indicates that there is a lack of aggregate demand for goods and services. b) A depression: This is a severe and prolonged economic downturn characterized by a significant decline in economic activity, high unemployment, and reduced GDP. It is a more severe form of a recession. c) An inflationary gap: This occurs when an economy's equilibrium output level is higher than its potential output level, resulting in an excess demand for goods and services. This can lead to a rapid increase in the price levels, called inflation. d) None of these: This option indicates that none of the previous options correctly describe the situation.

Given that the equilibrium GDP is too small, this indicates that there is insufficient demand for goods and services in the economy. This aligns with the definition of a recessionary gap, as a recessionary gap occurs when the equilibrium output level is lower than the potential output level.

Based on our understanding of the economic terms and the situation described in the exercise, the correct answer is: a) a recessionary gap