Final answer:
The assertion that real GDP fluctuations are solely the result of aggregate demand shifts is incorrect. Both aggregate demand and aggregate supply play crucial roles in GDP fluctuations, and trade can impact aggregate demand through changes in net exports.
Step-by-step explanation:
The statement that fluctuations in real GDP are caused only by changes in aggregate demand and not by changes in aggregate supply is false. Both aggregate demand and aggregate supply have significant impacts on the fluctuation of real GDP. For instance, a surge in investment by private firms in the 1990s increased the aggregate demand and this led to a rise in GDP. Similarly, if aggregate demand shifts outpace aggregate supply, it may lead to inflation without necessarily changing real GDP and unemployment, as shown in the provided figures. Moreover, business cycles, including recessions and recoveries, result from shifts in both aggregate demand and supply. Governments may alter fiscal policy to compensate for these shifts.
Trade can also shift the aggregate demand curve. Changes in net exports, which are a component of aggregate demand, can either decrease aggregate demand when they reduce or increase it when they rise, affecting real GDP in the short run.