Recessionary or Inflationary Gap?

Is a recessionary or inflationary gap bad for an economy? Have you ever wondered how the federal government and the Federal Reserve react to smooth out recessionary and inflationary gaps? In this activity, you will explore the concepts of fiscal policy and the attempts the U.S. government takes when the U.S. economy is in a recessionary or inflation gap. You will discuss the concepts of aggregate supply and aggregate demand to determine how the U.S. economy can work its way back to long-run equilibrium based.