Draw a graph representing a hypothetical economy in a recession.

To illustrate a hypothetical economy in a recession, we will need to create a graph that includes several key elements. The graph will consist of the following:

1. X-Axis: This will represent the real GDP of the economy.
2. Y-Axis: This will represent the aggregate expenditure (AE).
3. 45-Degree Line: This line will run diagonally from the origin (0,0) at a 45-degree angle. It represents all points where aggregate expenditure equals real GDP.
4. Aggregate Expenditure (AE) Curve: This curve will typically slope upwards, indicating that as GDP increases, so does aggregate expenditure.
5. Equilibrium Level of Real GDP: This is the point where the AE curve intersects the 45-degree line, showing the level of GDP where spending equals output.
6. GDP Gap: This is the difference between the potential GDP and the equilibrium GDP in a recession, indicating underutilization of resources.
7. Recessionary Gap: This will be highlighted as the distance between the equilibrium level of real GDP and the potential GDP, showing the downturn in economic activity.

When drawing the graph, label the axes clearly, and plot the 45-degree line. Then, draw the AE curve to show that it intersects the 45-degree line at a point which is below the potential GDP. Highlight the GDP gap and the recessionary gap to visualize the economic situation during a recession.