Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point W. The price level is Po. Now, suppose there is an exogenous fall in the price level to P₂. Which of the following statements describes the likely macroeconomic effects? OA. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the AD curve shifts from AD to AD¹, and equilibrium moves from point B to point D. OB. The AE curve shifts to AE2, a new equilibrium is established at point U, and the AD curve shifts from AD to AD¹, and equilibrium from point B to point D. OC. The AE curve shifts to AE2, a new equilibrium is established at point U, and the economy moves from point B to point C along AD. O D. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the economy moves from point B to point C along AD. Desired Aggregate Expenditure Price Level Y₁ W_ AE=Y AE₂ AEo AE₁ Yo Y₂ Real GDP Real GDP Q U Q Q

Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point W. The price level is Po. Now, suppose there is an exogenous fall in the price level to P₂. Which of the following statements describes the likely macroeconomic effects? OA. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the AD curve shifts from AD to AD¹, and equilibrium moves from point B to point D. OB. The AE curve shifts to AE2, a new equilibrium is established at point U, and the AD curve shifts from AD to AD¹, and equilibrium from point B to point D. OC. The AE curve shifts to AE2, a new equilibrium is established at point U, and the economy moves from point B to point C along AD. O D. The AE curve shifts to AE₁, a new equilibrium is established at point V, and the economy moves from point B to point C along AD. Desired Aggregate Expenditure Price Level Y₁ W_ AE=Y AE₂ AEo AE₁ Yo Y₂ Real GDP Real GDP Q U Q Q

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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