In the Long- Run Equilibrium, a Fall in the Exchange

question 12

Multiple Choice

In the long- run equilibrium, a fall in the exchange rate that increases exports leads to

• A) an increase in the equilibrium price level, but no change in equilibrium real GDP.
• B) no change in the equilibrium price level, but an increase in equilibrium real GDP.
• C) an increase in the equilibrium price level and a decrease in equilibrium real GDP.
• D) an increase in the equilibrium price level and an increase in equilibrium real GDP.

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Definitions:

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Panic of 1837

A financial crisis in the United States that led to a major recession, lasting until the mid-1840s.

National Bank

A bank chartered by a government and often given privileged control over the issuance and management of the country's currency and financial policy.

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