Between 2016 and 2018, an estimated 400,000 workers migrated to the economy of Zephyrus following a regional mobility agreement. During this period, domestic inflation stayed low, real GDP growth was highly robust, unemployment remained virtually unchanged, and the current account deficit widened. Given this information, which one of the following is most likely to have been correct between 2016 and 2018?
Inflation stayed low because the spike in consumer demand significantly outstripped any expansion in productive capacity.
Real GDP growth was robust because the influx of 400,000 workers expanded the economy's productive potential, shifting the long-run aggregate supply curve outwards.
Unemployment remained virtually unchanged because the arrival of 400,000 workers instantly widened the negative output gap.
The current account deficit widened because low stable domestic inflation made domestic exports less price-competitive.
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.