Answer to Question #242285 in Macroeconomics for Danu

Question

Policymakers who can influence AD cannot offset the adverse effects of a recession due to a fall in AS’. Do you agree with this statement? Explain the answer in words and using an AD-AS diagram.

Answer 1

The policies implemented are only meant to streamline and control events in and out of the economy. Therefore, the policies can no longer help an economy from getting into recession. For instance, COVID-19 has brought about declines within economies as policies were unable to control the state.