Question 8 Answer saved Marked out of 10.00 Flag question Consider the aggregate demand (AD), short run aggregate supply (SAS) and long run aggregate supply (LAS) curves shown in the following diagram. P ($) LAS 130- 120- SAS 110- 100- 90 - 80 - 400 500 600 700 800 900 GDP ($) (a) Does this economy have a recessionary gap or an inflationary gap? What values (high or low) would you expect for GDP, unemployment and inflation? Briefly explain your answer. (5 marks) (b) Identify an appropriate fiscal policy response that might be implemented, and explain how it might work. (3 marks) (c) State the impact your policy response in Question (b) would have on the budget balance. (2 marks)Question 8 Answer saved Marked out of 10.00 Flag question Consider the aggregate demand (AD), short run aggregate supply (SAS) and long run aggregate supply (LAS) curves shown in the following diagram. P ($) LAS 130- 120- SAS 110- 100- 90 - 80 - 400 500 600 700 800 900 GDP ($) (a) Does this economy have a recessionary gap or an inflationary gap? What values (high or low) would you expect for GDP, unemployment and inflation? Briefly explain your answer. (5 marks) (b) Identify an appropriate fiscal policy response that might be implemented, and explain how it might work. (3 marks) (c) State the impact your policy response in Question (b) would have on the budget balance. (2 marks)