Use the simple Keynesian model to answer this question. Draw a graph representing an economy that is in short-run equilibrium where the economy is in…

Use the simple Keynesian model to answer this question.

a. Draw a graph representing an economy that is in short-run equilibrium where the economy is in a recession. In your graph make sure you represent Ye and Yfe. Describe in words what would happen if this economy tried to produce at Yfe.

Answer: If this economy tries to produce at Yfe, aggregate expenditure will be less than aggregateproduction. This implies that unplanned inventories will increase and that producers willrespond…