(Use Keynesian AD-AS model for all questions)
a) By using an AD-AS model (Keynesian), what are the effects of a recession (which was caused by a decrease in aggregate demand). Assume economy started at general equilibrium. Label your graph.
b) What two options would you have as the chairman of the Fed. At what time would each policy be optimal?
c) Explain the effects of both options/policies and graph them as well.