Use the following to answer questions: -(Figure: Short- and Long-Run Equilibrium) Refer to Figure: Short- and Long-Run Equilibrium. If the economy is at equilibrium at E₁, it is in a(n): A) recessionary gap. B) inflationary gap. C) low level of unemployment. D) liquidity trap.

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The economy is at equilibrium below potential output (Yf), indicating a recessionary gap. This is shown by the output level (Y1) and the unemployment rate (U1) being below their potential levels (Yf and Uf).

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