Identify the graph that depicts a recessionary gap and an inflationary gap. Describe each graph using the relevant measurement terminologies from Module 2. For the recessionary gap, summarize how the economy would return to full employment using Classical theory.

Price Level (GDP Deflator) Graph A LRAS Price Level SRAS (GDP Deflator) LRAS Graph B SRAS Ple Ple AD AD Ye Yf Output Yf Ye Output (RGDP) (RGOP) PLe: Short Run Equilibrium Price Level Y = Income from Output Ye: SR Equilibrium Output Yf: Output at Full EmploymentKey Terms and Concepts Last Names A-K Other terms/concepts; use if applicable . Fiscal Policy . Aggregate Demand . Disposable Income . Short Run Aggregate Supply . Keynesian Theory & Sticky prices . Long Run Aggregate Supply . Classical Theory & Flexible Prices . Short Run Equilibrium Price Level . Short Run Equilibrium Output Last Names L-Z . Potential Real GDP . Monetary Policy . Full Employment . Federal Funds Rate . Recessionary Gap . Keynesian Theory & Sticky prices . Inflationary Gap . Classical Theory & Flexible Prices . Pessimism/ Optimism