10-6. Suppose that during the past 3 years, equilibrium
| 10-6. Suppose that during the past 3 years, equilibrium | ||||||||||
| real GDP in a country rose steadily, from $450 | ||||||||||
| billion to $500 billion, but even though the position | ||||||||||
| of its aggregate demand curve remained | ||||||||||
| unchanged, its equilibrium price level steadily | ||||||||||
| declined, from 110 to 103. What could have | ||||||||||
| accounted for these outcomes, and what is the | ||||||||||
| term for the change in the price level experienced | ||||||||||
| by this country? (See page 219.) | ||||||||||
| this can happen when aggregate supply rise in short run. This will shift equilibrium from E to E1. | ||||||||||
| the rise in supply could be due to short term reasons like a rise in productivity levels or a sudden rise in labor participation levels. | ||||||||||
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