FIGURE 23-3 -Refer to Figure 23-3. Suppose the Price Level in Economy

question 118

Multiple Choice

FIGURE 23-3
-Refer to Figure 23-3. Suppose the price level in Economy A is above P0. Which of the following statements describes what would occur?

• A) The AD curve would shift to the right until macro equilibrium is reached.
• B) Real GDP would be below its equilibrium level which would put downward pressure on the price level until it reaches macro equilibrium at P0.
• C) The amount of output supplied by firms is greater than total desired expenditure; excess supply will put downward pressure on the price level until it reaches macro equilibrium at P0.
• D) Real GDP would be below its equilibrium level which would put upward pressure on the price level until it reaches macro equilibrium.
• E) The AS curve would shift to the left until macro equilibrium is reached.

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Definitions:

Trade Deficit

A situation where the value of a country's imports exceeds the value of its exports.

Gold Standard

A monetary system in which the value of a country's currency is directly linked to a certain amount of gold, ensuring that the currency has a stable value.

International Finance

The study of financial systems, currencies, and markets, and how they operate in the global context.

International Trade

The exchange of goods, services, and capital between countries, driven by comparative advantage and global demand.