The accompanying diagram shows the current macro-economic situation for the economy of Albernia. Youhave been hired as an economic consultant to help theeconomy move to potential output, Yp.AggregatepricelevelLRASSRASP1E1AD1Real GDPYp- Potentialoutputa. Is Albernia facing a recessionary or inflationary gap?b. Which type of fiscal policy-expansionary orcontractionary-would move the economy ofAlbernia to potential output, Yp? What are someexamples of such policies?c. Illustrate the macroeconomic situation in Alberniawith a diagram after the successful fiscal policy hasbeen implemented.

a. Potential output : Yp Actual output : Y1 In the given diagram, actual output is lower than the…

The accompanying diagram shows the current macro- economic situation for the economy of Albernia. You have been hired as an economic consultant to help the economy move to potential output, Yp. Aggregate price level LRAS SRAS P1 E1 AD1 Real GDP Yp- Potential output Y1 Is Albernia facing a recessionary or inflationary gapa Which type of fiscal policy-expansionary or contractionary-would move the economy of Albernia to potential output, Yp? What are some examples of such policies? llustrate the macroeconomic situation in Albernia with a diagram after the successful fiscal policy ha een implemented ....