-Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If foreign real national income rises,at which point is the economy most likely to end up in the short run?
A) A
B) B
C) C
D) D
E) A change in foreign real national income would have no impact on the domestic economy.

Question

-Refer to Exhibit 8-1.Assume that the economy is originally in equilibrium at point A.If foreign real national income rises,at which point is the economy most likely to end up in the short run?
A) A 
B) B 
C) C 
D) D 
E) A change in foreign real national income would have no impact on the domestic economy.

Quizplus · Accepted Answer

An increase in foreign real national income would likely lead to an increase in demand for domestic exports. This would shift the aggregate demand curve to the right, moving the equilibrium from point A to point B in the short run, indicating an increase in both the price level and real GDP.