Question

When is the economy in a​ recession? A. when the aggregate expenditure line does not intersect the 45o line anywhere B. when the aggregate expenditure line intersects the 45o line at a level of GDP above potential GDP C. when the aggregate expenditure line intersects the 45o line at a level of GDP below potential GDP D. when the aggregate expenditure line intersects the 45o line at a level of GDP equal to potential GDP

Answer 1

Answer:

C. when the aggregate expenditure line intersects the 45o line at a level of GDP below potential GDP

Explanation:

When this occurs the economy is in recession, when the line intersects above  the potential GDP then, the economy is also en recession.

The economy will enter in recession also, if the level of demanded expenditures excees the level of the level of output. Once the shelves are empied, the business can consider to increase output or prices to met hte demand.