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Short Answer 1. Use an aggregate demand / apgregate supply diagram to illustrate at a short run equilibrium in a recession 2
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Answer #1

1.

LRAS SRAS Price Level .AD Real GDf Recessony Gap

2. Cyclical unemployment occurs during recession when the economy is below full employment output level

3. Increase in government spending or decrease in taxes shifts the AD curve upwards. The new equilibrium occurs where LRAS, AS and AD meets.This would restore full employment equilibrium.

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