Use the following to answer questions: Figure: Inflationary and Recessionary Gaps -(Figure: Inflationary and Recessionary Gaps) Look at the figure Inflationary and Recessionary Gaps. At E₂, the economy: A)is in equilibrium. B)has an inflationary gap. C)has a recessionary gap. D)has high unemployment.

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At E₂, the economy is at the intersection of the aggregate demand curve (AD) and the short-run aggregate supply curve (SRAS), which represents equilibrium in the economy. There is neither an inflationary gap nor a recessionary gap, and unemployment is not necessarily high.

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