Illustrate the effect of captial formation by production

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Q. Suppose that there is a contraction in aggregate demand (ie. aggregate demand falls) and the economy goes into a recession.If policy-makers take no action, how will the economy evolve over time? Explain in words and using an aggregate-demand/ aggregate-supply diagram.

Q. Illustrate the effect of captial formation by comparing the production possibilty curves, at the present time and ten years in the future, for two economies, one with high and the other with a low rate of capital formation

Reference no: EM1350682

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