Consider the aggregate demand (AD). short run aggregate supply (5A5) and long run aggregate supply (LAS) curyes shown in the following diagram. PlSJ m5 130 1.20 5A5 110 100 90 SCI AD LII 400 500 BUD F00 800900 GDP {$1 (a) Does this economy have a recessionary gap or an inationary gap? What values (high or low) would you expect for GDP, unemployment and ination? Briey explain your answer. (5 marks) (b) Identify an appropriate scal 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)