1. In part (a) of Exhibit 14A.8, suppose that the initial equilibrium is at real GDP level Y1 and…

1. In part (a) of Exhibit 14A.8, suppose that the initial equilibrium is at real GDP level Y1 and price level P2. At real GDP level Y1 there is a. an inflationary gap. b. a recessionary gap. c. full employment. d. long-run equilibrium. 2. In part (b) of Exhibit 14A.8, the intersection of SRAS with AD indicates a. an economy experiencing a recessionary gap. b. an economy experiencing an inflationary gap. c. that the economy is in long-run equilibrium. d. that the economy has an unemployment rate currently less than the natural rate of unemployment.