8. Use the AD-AS framework- in the simple Keynesian model- to depict an economy in equilibrium with a recessionary gap. Then tell why Keynes believed that the government may have a management role to play in the economy. [2x2=4 pts]
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In the simple Keynesian model, the aggregate demand (AD) curve represents the total spending in the economy, while the aggregate supply (AS) curve represents the total output produced. In equilibrium, the AD curve intersects the AS curve at the level of output Show more…
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