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

Multiple Choice

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. What happens in the short run?

A) There will be an increase in aggregate output demanded and the economy moves from point A to point G.
B) Real GDP increases to Y₂ and the price level rises to P₂.
C) Real GDP decreases to Y₃ and the price level falls to P₃.
D) Since the economy is already at its potential output, only the price level will rise to P₂.