Question: Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 1 1

Construct an Aggregate Supply and Aggregate Demand model where AS and AD are in equilibrium at potential GDP at a price level of 110 and Real GDP of $13.0 trillion dollars. Be sure to label all parts of the graph.
a. Graph the initial effects of a recession that causes AD to decrease and real GDP to fall $0.5 trillion.
b. Explairf what will happen in the long run if nothing is done.
c. If the government wanted to intervene in the economy, explain the Fiscal Policy measures that can be used to bring real GDP back to potential.
d. Assume the Government multiplier is 1.25 and Potential GDP has grown to $14 trillion dollars. What amount of discretionary fiscal policy is needed to restore real GDP to potential GDP?
e. Graphically show the government's fiscal policy action and explain the outcome.
Construct an Aggregate Supply and Aggregate

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