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1 . A change in overall consumer confidence will impact the macroeconomy. Here we will model a decrease in consumer confidence using the AD -

1. A change in overall consumer confidence will impact the macroeconomy. Here we will model a decrease in consumer confidence using the AD-AS and look at how monetary policy can try and smooth out the business cycle. Our shock in this question will be: consumer confidence decreases, holding all else constant. c. According to your diagram, is this economy in an expansion or a recession? Explain.

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