Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
Figure: Inflationary and Recessionary Gaps
-(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y₁ in panel (b) , the economy is in:

A) a recessionary gap.
B) an inflationary gap.
C) simultaneous short-run and long-run equilibrium.
D) a high level of unemployment.