Suppose the economy is experiencing a recession with high unemployment. With a goal of increasing GDP...
Suppose the economy is experiencing a recession with high unemployment. With a goal of increasing GDP back to the full employment level:
What would you suggest policy makers do as the correct course of action?
Homework Answers
This would be the case when economy is operating at less employment level or a level below their full employment equilibrium. Economy would be at point A when economy lacks their full potential by QL - QS.
There can be policy which can take the economy to its long run, either raising the Aggregate demand or raising the aggregate supply but I would suggest policy makers should focus on raising the demand of good as there is no point raising the supply of goods without more demand for it.
When AD shifts to AD1, economy reaches to their full employment
level but raises the prices level of goods to P1 from P. 
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Suppose the economy is experiencing a recession with high
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Suppose the economy is experiencing a recession with high unemployment. With a goal of increasing GDP...
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