Use the following to answer questions: -(Figure: Short- and Long-Run Equilibrium II) Refer to Figure: Short- and Long-Run Equilibrium II. If the economy is at equilibrium at E₁, it is in a(n): A) recessionary gap. B) inflationary gap. C) high level of unemployment. D) liquidity trap.

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An inflationary gap occurs when the equilibrium level of output is above the full employment level, leading to upward pressure on prices due to high demand relative to supply.

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