Use the Following to Answer Questions

question 123

Multiple Choice

Use the following to answer questions .
Exhibit: Short-run Aggregate Supply
-(Exhibit: Short-run Aggregate Supply) 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.

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Definitions:

Financial Statements

Concise financial records that encapsulate a company's financial performance, position, and cash flows over a specific period.

Expense Account

A category within accounting that tracks money spent or costs incurred by a business in its operational activities.

Income Summary

An account used temporarily during the closing process to aggregate all income and expense accounts before transferring their balances to the retained earnings account.

Current Assets

Assets that are expected to be converted into cash, sold, or used within a year, including cash, inventory, and receivables.