Question

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?

Short answer

The term for the change within the indicator experienced by this country is secular deflation.

Step-by-step solution

Unchanged

It has been stated that even wrath no change in aggregate demand, real GDP of the country has increased whileindex has declined.
This phenomenon can only be observed if long-run aggregate supply curve of the economy shifts rightwards because only during this case, with aggregate demand remaining unchanged, a rise in GDP and a decline inindicator is experienced.

Secular deflation

The given country is experiencing a decline inindicant resulting froma rise in real GDP but no change in aggregate demand.
When persistent decline inindex is experiencedthanks to increase in real GDP (economic growth) while aggregate demand remains relatively unchanged then this decline inindex number is termed as secular deflation.
So, the term for the changewithin the indicator experienced by this country is secular deflation.