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Suppose the economy is at full employment when AD = AD3. a. The GDP gap when the demand curve is at AD2 is b.

Suppose the economy is at full employment when AD = AD3. a. The GDP gap when the demand curve is at AD2 is b. Would this mean the economy is in a recession or expansion? billion Price Level (average price) 40 38 36 34 32 AD. 1 30 28 26 24 22 20 0 AD 2 2 4 AD 3 AS 6 8 10 12 14 16 18 20 Real Output (quantity in billions per year)

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