Suppose That the Economy Is in a Recession as a Result

question 137

Essay

Suppose that the economy is in a recession as a result of a fall in investment spending and real GDP is below potential GDP.
(A) Illustrate this on an aqgreqate demand inflation diagram
(B) When real GDp falls, what happens to tax revenue, gavernent spending and the budget balance?
(C) If a balenced budget mmenkiment were in place, what wauld heve to happen to gavernment spending andar taxes? Illustrate an the diagram.
(D) It is wise to allow the gaverment to run a deficit during a recession and a suplus during an exgansion. Please answer true or false and explain.

---

Definitions:

Apprenticeships

Training programs that combine on-the-job training with classroom instruction, typically in a trade or profession, under the guidance of skilled workers.

Unions

Organizations that represent the collective interests of workers in negotiations with employers about wages, working conditions, benefits, and other aspects of employment.

Company Performance

An assessment of a firm's operational efficiency, profitability, and financial health.

Wages

The fixed regular payment, typically calculated on an hourly or daily basis, paid by an employer to an employee for their labor.