Refer to Figure 10.3. If full-employment GDP is $600 billion and the economy is on AD1,
A. An inflationary gap exists, and AD must increase by more than $100 billion to eliminate it.
B. A recessionary gap exists, and AD must increase by less than $100 billion to eliminate it.
C. A recessionary gap exists, and AD must increase by more than $100 billion to eliminate it.
D. An inflationary gap exists, and AD must increase by $100 billion to eliminate it.
Answer: C
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