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1.i) According to the economy's selfcorrecting mechanism, how does the economy return to potential output following a negative demand shock? (4 marks) ii) With reference

1.i) According to the economy's selfcorrecting mechanism, how does the economy return to potential output following a negative demand shock? (4 marks)

ii) With reference to b(i) how does the recovery process differs if the government implement an economic stimulus policy? (4 marks)

2.How does real business cycle theory explain fluctuations in output and employment?(7 marks)

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