Exhibit 9-4

-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P₃.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

Question

Exhibit 9-4

-Refer to Exhibit 9-4.Assume the economy is self-regulating and currently is in long-run equilibrium with the price level equal to P₃.After an initial increase in U.S.exports,the long-run equilibrium will be brought about by a shift from

Quizplus · Accepted Answer

An initial increase in U.S. exports will lead to an increase in aggregate demand (AD), shifting the AD curve from AD₃ to AD₁. This shift will result in a short-run equilibrium at point E1, where price level increases from P₃ to P₂. However, in the long-run, the increase in output due to the shift in AD will lead to an increase in resource prices, which will shift the SRAS curve from SRAS₂ back to SRAS₁, restoring the economy to its initial long-run equilibrium with a price level of P₃. Therefore, the correct choice is C.

Exhibit 9-4 -Refer to Exhibit 9-4.Assume the Economy Is Self-Regulating and Currently