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2. The accompanying diagram shows the current macroeconomic situation for the economy of Brittania; real GDP isY1 , and the aggregate price level is P1.

2. The accompanying diagram shows the current macroeconomic situation for the economy of Brittania; real GDP isY1 , and the aggregate price level is P1. You have been hired as an economic consultant to help the economy move to potential output, Yp . Aggregate price LRAS level SRAS P1 E1 AD1 Potential Yp Y1 Real GDP output A. Is Brittania facing a recessionary or inflationary gap? B. Which type of fiscal policy - expansionary or contractionary - would move the economy of Brittania to potential output,Yp ? What are some examples of such policies? C.Illustrate the macroeconomic situation in Brittania with a diagram after the successful fiscal policy has been implemented

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