Draw a graph with “Level of real output” on the vertical axis and “Time” on the horizontal axis. If the long-run trend line of economic growth for the United States were to appear on your graph as a straight upsloping line, how would you pencil in economic fluctuations in relation to that straight line? Referring to your graph, briefly explain why economic fluctuations and economic growth are compatible concepts. Check your drawing against Figure 9.1.

Figure 9.1:

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Level of real output Peak Recession Growth Trough Peak Recession Expansion Time Trend Trough Peak Expansion