1. The graph below indicates an economy originally in long-run equilibrium at potential output. (Subscripted by 0.) A. On the graph, indicate a recessionary gap that arises because of a negative shock to aggregate demand. Indicate the short-run price level, output, AD curve, and SAS curve with a 1 subscript. Show on the graph how the economy returns to full potential output in the long run under the Classical Theory. Indicate the new long-run price level, output, AD curve, and SAS curve with a 2 subscript. In a sentence or two, explain how the economy returns to full potential output. B. Dynamics for a Recessionary Gap: The Classical Theory Price Level Po LAS Y=Yp SASO ADO Output