Economy is in recession with high unemployment-low output

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The economy is in recession with high unemployment and low output

(a) Draw a graph of aggregate demand and aggregate supply to illustrate the current situation. Be sure to include the AD curve, the SRAS curve and the LRAS curve.

(b) What fiscal policy should be pursued in this instance-expansionary or contractionary? What will be the effect of the appropriate policy on aggregate demand?

Reference no: EM131194458

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