Final answer:
An economic recovery includes increasing employment, rising consumer spending, and expanding GDP, but not necessarily decreasing government deficits option (d). During recovery, government deficits may rise due to expansionary fiscal policies that aim to stimulate growth.
Step-by-step explanation:
An economic recovery typically includes a variety of indicators such as increasing employment, rising consumer spending, and expanding Gross Domestic Product (GDP). However, an economic recovery does not necessarily include decreasing government deficits.
During the initial stages of a recovery, government deficits may increase due to expansionary fiscal policies aimed at stimulating growth, such as increased spending or tax cuts. Over time, as the economy strengthens, increased tax revenues and reduced welfare payments may contribute to a reduction in the government's deficit.
When considering a response to a recession, an expansionary fiscal policy would be most appropriate. This involves increasing government spending, reducing taxes, or a combination of the two, to boost aggregate demand.
As a result, you might see a rightward shift in the aggregate demand curve on an Aggregate Demand-Aggregate Supply (AD-AS) diagram, which reflects the increased economic activity and movement toward an economic recovery.