Question: Option 1: While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 months. What conclusions about the state of the economy? Would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD-AS model to describe the economy. Which curve do you think caused the change? Explain your reasoning.

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Option 2: Watch the Shifts in Aggregate Demand video (embedded in the reading) and summarize the factors that cause the AD curve to shift. Did the video help you understand the model? Pick one of the four scenarios listed below the video and explain in your own words which way the AD curve will shift.

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