Published on January 28, 2016
The Current State of the Economy and Unemployment Imagine a scenario where there is a decline in aggregate demand. Identify which part of the business cycle is part of a decline in aggregate demand. Gross Domestic Product (GDP) measures the amount of new production. A change in the amount of new production affects employment. Describe what would happen to GDP, the unemployment rate and the inflation rate if there is a decline in aggregate demand. Reference: Chapter 6, section 6.3: Aggregate Equilibrium and Changes in Equilibrium.