When recession due to decrease in aggregate demand occurs

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a) When a recession due to a decrease in aggregate demand occurs, how can the Central Bank react? What does that reaction look like in the model?

b) When a movement in aggregate supply causes a recession, what does that look like in the model? (shift of a curve, or movement along a curve, and which one(s) ?) Draw a graph

c) When such a recession occurs, how can the Central Bank react? What does that reaction look like in the model?

d) What are the long-run implications of the Central Bank is actions in a) and c), respectively?

Reference no: EM13897114

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