Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?

Question

BlackTom AI · Accepted Answer

Question restatement: Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?

Option a: There will be an increase in aggregate output demanded and the economy moves from point A to point G.
- This matches the typical short-run response to an increase in net exports (an autonomous demand shock). An increase in NX shifts AD to the right, raising real GDP and moving the economy from A toward a higher output point like G, while the price level may adjust accordingly in the short run. This option correctly captures the direction of the demand-side expansion and the movement along the AD/AS framework.

Option b: Since the economy is already at its potential output, only the price level will rise to P2.
- This describes a scenario where output remains at potential (no real GDP gain) and only prices rise, which would be more characteristic of a purely vertical long-run aggregate supply or demand-pull inflation with no output response. In the short run, an NX increase typically raises output as well, so this is not consistent with the scenario depicted.

Option c: Real GDP decreases to Y3 and the price level falls to P3.
- This describes a contractionary movement (lower GDP and lower price level), which would occur if aggregate demand fell or if supply shocks pushed the economy toward a lower equilibrium. An increase in NX is expansionary, so this option is inconsistent with the shock described.

Option d: Real GDP increases to Y2 and the price level rises to P2.
- While this option indicates a GDP rise, it specifies a particular level Y2 and price P2 that may not align with the graph’s labeling after a net export increase. If the diagram shows movement toward point G rather than Y2-P2, this could be an incorrect mapping of the short-run outcome to the depicted coordinates. The core issue is whether the move is to G; mislabeling of the exact coordinates makes this option dubious.

Option e: The economy rapidly moves to point E.
- Point E in the diagram is typically associated with a different combination of price level and output, often tied to a distinct shock or policy path. An NX increase does not necessarily imply a rapid move to E; the standard short-run response is a rightward shift along the demand curve, moving toward G rather than jumping to E. Therefore this is not the correct description of the short-run response.

Summary: Evaluating all options, option a correctly describes the standard short-run impact of higher net exports as an increase in aggregate demand, leading the economy from point A toward point G. The other options mischaracterize the direction of output change, price level response, or the specific diagrammatic movement.

Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?单项选择题

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