Exhibit 5.1

-Refer to Exhibit 5.1, which shows the aggregate demand and supply curves for the United States. From the beginning of period 1 to the end of period 2, _____
A) real GDP decreased and then increased.
B) real GDP increased and then decreased.
C) real GDP fell from $10,000 to $6,000.
D) real GDP remained constant at $6,000.
E) the inflation rate fell from 4 percent to 2 percent.

Question

Exhibit 5.1
 
-Refer to Exhibit 5.1, which shows the aggregate demand and supply curves for the United States. From the beginning of period 1 to the end of period 2, _____
A) real GDP decreased and then increased. 
B) real GDP increased and then decreased. 
C) real GDP fell from $10,000 to $6,000. 
D) real GDP remained constant at $6,000. 
E) the inflation rate fell from 4 percent to 2 percent.

Quizplus · Accepted Answer

From the beginning of period 1 to the end of period 2, the economy experienced a recession followed by a recovery. The aggregate demand shifted left from AD1 to AD2 causing a decrease in real GDP from $10,000 to $8,000. The aggregate supply then shifted right from AS1 to AS2 causing an increase in real GDP from $8,000 to $10,000. Therefore, real GDP decreased and then increased. The exhibit does not provide information about the inflation rate.

Exhibit 5.1 -Refer to Exhibit 5.1, Which Shows the Aggregate Demand and the Aggregate