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 aggregate demand inflation diagram.
(B)When real GDP falls,what happens to tax revenue,government spending,and the budget balance?
(C)If a balanced budget amendment were in place,what would have to happen to government spending and/or taxes? Illustrate on the diagram.
(D)It is wise to allow the government to run a deficit during a recession and a surplus during an expansion.Please answer true or false and explain.

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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 aggregate demand inflation diagram.
(B)When real GDP falls,what happens to tax revenue,government spending,and the budget balance?
(C)If a balanced budget amendment were in place,what would have to happen to government spending and/or taxes? Illustrate on the diagram.
(D)It is wise to allow the government to run a deficit during a recession and a surplus during an expansion.Please answer true or false and explain.

Suppose That the Economy Is in a Recession as a Result