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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

Suppose That the Economy Is in a Recession as a Result