) The economy is in short-run macroeconomic equilibrium at point E1 in the accompanying diagram. Based on the diagram, answer the following
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13) The economy is in short-run macroeconomic equilibrium at point E1 in the accompanying diagram. Based on the diagram, answer the following questions.

a.The economy is facing a recessionary gap because Y1 is less that Ypb.The government could use either fiscal or monetary policy.c.If the government did not intervene, the economy would eventually move back to potential output on its own. However, when this happens, the output will be at a lower price level.d.It could be advantageous for the government to intervene because it would speed up the process of getting rid of the recessionary gap. However, it could also be disadvantageous because it could cause macroeconomic instability.
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