Exhibit 23-6 -According to Exhibit 23-6, Line Abd Shows the Path of the Path

Multiple Choice

Exhibit 23-6
-According to Exhibit 23-6, line abd shows the path of potential GDP. In Year 2, suppose the expenditure line intersects the 45-degree line at the level of spending corresponding to point b. If, in Year 3, the economy is at point c, then

A) the expenditure line has shifted up the 45-degree line more than it would have if real GDP equaled potential GDP in Year 3.
B) the expenditure line has shifted down the 45-degree line.
C) the expenditure line has shifted up the 45-degree line and equals a level of income greater than real GDP.
D) the expenditure line has shifted up the 45-degree line to a point where real GDP equals potential GDP in Year 3.
E) potential GDP has risen, and we've moved to a new point of spending balance.