Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
Figure: Policy Alternatives
-(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. Suppose that the initial equilibrium is at real GDP level Y₁ and price level P₂ in panel (a) . At real GDP level Y₁ there is:

A) an inflationary gap.
B) a recessionary gap.
C) no gap.
D) long-run equilibrium.