Figure: Real Shocks Reference: Ref 13-3 (Figure: Real Shocks) From Point X in the accompanying dynamic aggregate demand model, a negative real shock will cause the economy to move to Point

Question

Figure: Real Shocks  Reference: Ref 13-3 (Figure: Real Shocks) From Point X in the accompanying dynamic aggregate demand model, a negative real shock will cause the economy to move to Point

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From Point X, a negative real shock will cause a decrease in aggregate demand, leading to a shift of the AD curve to the left. This movement will lead to a new equilibrium point, which is Point Y, at a lower level of output and a lower price level.