Final answer:
A recession is shown in the AD/AS model by a leftward shift of the AD curve, leading to lower output and higher unemployment. A tax relief bill can lead to an increase in consumption and investment, shifting the AD curve rightward, potentially moving the economy out of the recession.
Step-by-step explanation:
How a Recession is Illustrated in the AD/AS Model
A recession in the AD/AS (Aggregate Demand/Aggregate Supply) model is represented by a fall in aggregate demand, which is illustrated by a leftward shift of the Aggregate Demand (AD) curve.
This leftward shift is typically caused by a decrease in consumption, investment, government spending, or net exports. During a recession, output decreases leading to higher unemployment, and the economy operates below its potential GDP.
The Effect of a Tax Relief Bill on the AD/AS Model
When a tax relief bill is passed, imposing tax cuts to the public, it can potentially lead the economy out of a recession. Tax cuts increase disposable income for consumers and businesses, which can stimulate consumption and investment.
Therefore, in the AD/AS model, this would be shown by a rightward shift of the AD curve, indicating an increase in aggregate demand. This shift could move the economy closer to its potential output, decreasing cyclical unemployment and promoting economic recovery.