Answered: Suppose that the U.S. economy has a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the U.S. economy has a recessionary gap and the world economy goes into an expansion. Explain the effect of the expansion on U.S. real GDP and unemployment in the short run.

1. A global expansion will increase U.S. exports, push down the AE curve and the AD curve will shift left. Prices will decrease along with an increase in the U.S. GDP.

2.A global expansion will increase U.S. exports, push up the AE curve and the AD curve will shift left. Prices will increase along with an increase in the U.S. GDP.

3. A global expansion will increase U.S. exports, push up the AE curve and the AD curve will shift right. Prices will increase along with an increase in the U.S. GDP.

4. A global expansion will decrease U.S. exports as other countries increase their exports at the cost of the U.S. The AE will move down and the AD curve will shift right. Prices will increase along with a decrease in the U.S. GDP.

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