2. Suppose that the economy is undergoing a recession because of a fall in aggregate demand. a....
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2. Suppose that the economy is undergoing a recession because of a fall in aggregate demand.
a. Using an aggregate-demand/aggregate-supply diagram, depict the current state of the economy.
b. What is happening to the unemployment rate?
c. “Capacity utilization” is a measure of how intensively the capital stock is being used. In a recession, is capacity utilization above or below its long-run average? Explain.
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