Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions .
Exhibit: The Inflation-Unemployment Cycle
-(Exhibit: The Inflation-Unemployment Cycle) Because of lags in the application of expansionary policy to counter a recessionary gap, the economy may:

A) not experience any change in the price level or level of unemployment.
B) move past full employment and enter an inflationary gap situation.
C) fall into deeper recession.
D) experience a fall in the price level as illustrated by the move from point 3 to point 1.