Use the Following to Answer Questions

question 19

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. As a result of this,

• A) real GDP is temporarily above potential output.
• B) the economy's potential output increases to Y₂.
• C) the economy moves to a new long-run equilibrium at point B.
• D) there is some cyclical unemployment.

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Definitions:

Natural Rate

The natural rate often refers to the natural rate of unemployment, which is the level of unemployment consistent with sustainable economic growth, not accelerated by inflation.

Unexpectedly High

A level or measure that exceeds what was anticipated or forecasted.

Natural Rate

The long-term rate of unemployment around which the unemployment rate fluctuates, or the rate of output expected when resources are fully employed.