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Prior to the recession of 2007, during the 2003-2006 period, which response best describes aggregate economic performance in the United States?
Aggregate demand and aggregate supply were both increasing with an increasing real GDP and moderate price inflation.
Unemployment was perilously high in the 2003-2006 period. Expansionary fiscal policy was being explicitly used.
The country was battling very high inflation with very restrictive monetary policy that increased sharply the unemployment rate.
The country was suffering from a collapse of aggregate demand which lowered real GDP and threatened deflation.