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.

Question

Quizplus · Accepted Answer

In the long-run, the economy is at full employment, so an increase in exports shifts the aggregate demand curve right, raising the price level but not affecting real GDP.

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