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Canada Exports Rise, GDP Gains: AD Curve Shift

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Statistics Canada reported that Canadian exports increased by $14 billion in the second quarter of 2017. This increase in exports would cause the aggregate demand curve to shift rightward from AD0 to AD1, leading to a new short-run equilibrium at point 1 and a new long-run equilibrium at point 2 on the graph as the economy adjusts to higher output.

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Statistics Canada reported that in the second quarter of 2017 Canadian exports increased by $14 billion. Explain and draw a graph to illustrate the effect of an increase in exports on equilibrium real GDP in the long run. Exports increase by $14 billion and the aggregate demand curve shifts to AD 1. Draw a point at the new short-run equilibrium. Label it 1. Draw a point at the new long-run equilibrium. Label it 2. Draw only the objects specified in the question.

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Canada Exports Rise, GDP Gains: AD Curve Shift

  • 1. Statistics Canada reported that in the second quarter of 2017 Canadian exports increased by $14 billion. Explain and draw a graph to illustrate the effect of an increase in exports on equilibrium real GDP in the long run. Exports increase by $14 billion and the aggregate demand curve shifts to AD 1. Draw a point at the new short-run equilibrium. Label it 1. Draw a point at the new long-run equilibrium. Label it 2. Draw only the objects specified in the question.