question archive Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____ is to the potential GDP line
Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____ is to the potential GDP line
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Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____ is to the potential GDP line.
a. AD curve
b. AS curve
c. AS and AD curve
d. equilibrium
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- The correct option is d. Equilibrium.
The intersection of AD/AS curves helps to determine the actual GDP of a nation. When an economy is in the recessionary phase then the actual GDP level of a nation will fall and the gap between the actual and potential GDP widens. Therefore, the difference between the equilibrium in the AD/AS model and the potential GDP depicts the recession in the economy.
