Exhibit 14A-1 Aggregate demand and supply model

Based on Exhibit 14A-1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point: 

The economy is in an expansion when it is

A) moving from a peak to a trough. B) moving from a trough to a peak. C) at its peak. D) at its trough.

Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?

a. Real GDP rises, and nominal value of the domestic currency falls. b. Real GDP falls, and nominal value of the domestic currency rises. c. Real GDP rises, and nominal value of the domestic currency remains the same. d. Real GDP rises, and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.