Figure 7-3 -Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. As a result of this, A) real GDP is temporarily above potential output. B) the economy's potential output increases to Y₂. C) the economy moves to a new long-run equilibrium at point B. D) there is some cyclical unemployment.

Question

Quizplus · Accepted Answer

An increase in net exports leads to an increase in aggregate demand, which temporarily pushes real GDP above potential output, creating an economic expansion.

Figure 7-3 -Refer to Figure 7-3. Suppose That the Economy Is in Economy