I need help with number 5 & 6. Thank you ?? 5. Assume there is a decrease in the demand for goods and services, which leads to a decrease inthe real GDP, and eventually the economy falls into recession.a. When the economy enters a recession due to a decline in demand, what will happen tothe price level?(Enter response here.)b. Assume there is no government intervention. Explain how the economy will eventuallyget back to the natural rate of output (real GDP)?(Enter response here.) (Enter response here.)6. A number of macroeconomic variables decline during recessions. One of these variables is theGDP.a. What other variables, besides real GDP tend to decline during recessions? Given thedefinition of real GDP and its components, explain the declines in these economicvariables which are to be expected.(Enter response here.)b. Empirical studies indicate that the long-run trend in real GDP of the USA has anupward trend. How is this possible given business cycles and macroeconomicfluctuations? What factors explain the upward trend in spite of the cycles?(Enter response here.)

Gross Domestic Product (GDP) refers to the total number of goods and services produced and sold in…

Answered: 5. Assume there is a decrease in the…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter36: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

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I need help with number 5 & 6. Thank you ??

5. Assume there is a decrease in the demand for goods and services, which leads to a decrease in
the real GDP, and eventually the economy falls into recession.
a. When the economy enters a recession due to a decline in demand, what will happen to
the price level?
(Enter response here.)
b. Assume there is no government intervention. Explain how the economy will eventually
get back to the natural rate of output (real GDP)?
(Enter response here.)

(Enter response here.)
6. A number of macroeconomic variables decline during recessions. One of these variables is the
GDP.
a. What other variables, besides real GDP tend to decline during recessions? Given the
definition of real GDP and its components, explain the declines in these economic
variables which are to be expected.
(Enter response here.)
b. Empirical studies indicate that the long-run trend in real GDP of the USA has an
upward trend. How is this possible given business cycles and macroeconomic
fluctuations? What factors explain the upward trend in spite of the cycles?
(Enter response here.)

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