Exhibit 10.7

-Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If output was $7.5 trillion at point W and decreases to 7.2 trillion, the economy moves from _____

Question

Exhibit 10.7
 
-Refer to Exhibit 10.7, which shows the equilibrium price level and real GDP in an aggregate demand-aggregate supply model. If output was $7.5 trillion at point W and decreases to 7.2 trillion, the economy moves from _____

Quizplus · Accepted Answer

Point W represents the initial equilibrium where the aggregate demand curve intersects the short-run aggregate supply curve. If output decreases from $7.5 trillion to $7.2 trillion, the economy moves to a point below the initial equilibrium, represented by point H. Therefore, the correct answer is E, which represents the movement from point W to point H.

Exhibit 10.7 -Refer to Exhibit 10.7, Which Shows the Equilibrium Price Level