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    Hi,

    Straight to the point,

    I know that fiscal policy is used to reduce unemployment but on the internet, it says that it depends because if the economy is working at full capacity, fiscal policy will only lead to inflation, but when there's an output gap it will reduce unemployment.

    My question is- can the economy be under recession when they are working at full capacity? If so how is it possible?

    Thanks!
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    (Original post by liemluji)
    Hi,

    Straight to the point,

    I know that fiscal policy is used to reduce unemployment but on the internet, it says that it depends because if the economy is working at full capacity, fiscal policy will only lead to inflation, but when there's an output gap it will reduce unemployment.

    My question is- can the economy be under recession when they are working at full capacity? If so how is it possible?

    Thanks!
    This link may help...
    http://www.economicshelp.org/macroec...se-recession2/
 
 
 
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