1 . What are the implications if the price level is currently P1?a.There is a shortage of goods and services and there is an inflationary gap.b.There is a surplus of goods and services and there is an inflationary gap.c.There is a shortage of goods and services and there is a recessionary gap.d.There is a surplus of goods and services and there is a recessionary gap.2. Refer to the above graph to answer this question. What will happen in the long run if the price level is currently P1?a.The price level will increase but the nominal wage will decrease.b.Both the price level and the nominal wage will increase.c.Both the price level and the nominal wage will decrease.d.The price level will decrease but the nominal wage will increase.3. Refer to the above graph to answer this question. To close the gap, aggregate demand would have to:a.Become a vertical line.b.Remain the same.c.Increase.d.Decrease.4. Refer to the above graph to answer this question. Assuming the economy is in equilibrium, what kind of gap exists?a.Consumer goods gap.b.Capital goods gap.c.Inflationary gap.d.Recessionary gap.

SECTION BREAK. Answer all the part questions. LAS Price Level % AD Real GDP Refer to the above graph to answer this