The economy is in short-run macroeconomic equilibrium at E₁, where the aggregate demand curve, AD₁, intersects the SRAS curve. However, it is not in long-run macroeconomic equilibrium. At E₁, there is a recessionary gap of Y_P −Y₁. An expansionary fiscal policy—an increase in government purchases of goods and services, a reduction in taxes, or an increase in government transfers—shifts the aggregate demand curve rightward. It can close the recessionary gap by shifting AD₁ to AD₂, moving the economy to a new short-run macroeconomic equilibrium, E₂, which is also a long-run macroeconomic equilibrium.