Answer to Question #242237 in Macroeconomics for Danu

Question

suppose that an economy is undergoing a recession because of a fall in AD using an aggregate demand aggregate supply (AD-AS) diagram, depict the situation of the economy

Answer 1

The interplay of buyers and producers of all output determines the national income (real GDP) and the price level. In other words, the short-run equilibrium production and price level are determined by the intersection of aggregate demand (AD) and short-run aggregate supply (SRAS).