Suppose that an economy is producing an output that is less than the full-employment level of output.
a. Suggest one policy to bring the economy back to its full employment level.
b. Show the impact of the policy graphically using the aggregate demand and aggregate supply graph, clearly marking the equilibrium points before and after the policy action.
c. Suppose that the goal of the government is to close the gap by adding as little to the government's deficit as possible. In this case, what policy should be recommended?

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The Answer of Suppose that an economy is producing an output that is less than the full-employment level of output.
a. Suggest one policy to bring the economy back to its full employment level.
b. Show the impact of the policy graphically using the aggregate demand and aggregate supply graph, clearly marking the equilibrium points before and after the policy action.
c. Suppose that the goal of the government is to close the gap by adding as little to the government's deficit as possible. In this case, what policy should be recommended?

Suppose That an Economy Is Producing an Output That Is