Solved

Refer to the Above Diagram

Question 13

Multiple Choice

Refer to the above diagram.The initial aggregate demand curve is AD<sub>1</sub> and the initial aggregate supply curve is AS<sub>1</sub>.If government offsets the decline in real output resulting from short-run cost-push inflation by increasing aggregate demand from AD<sub>1</sub> to AD<sub>2</sub>: A) real output will rise above Q<sub>f</sub>. B) the price level will rise from P<sub>1</sub> to P<sub>2</sub>. C) it is possible that aggregate supply will shift rightward from AS<sub>2</sub> because nominal wage demands will rise. D) the price level will rise from P<sub>2</sub> to P<sub>3</sub>. Refer to the above diagram.The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1.If government offsets the decline in real output resulting from short-run cost-push inflation by increasing aggregate demand from AD1 to AD2:


A) real output will rise above Qf.
B) the price level will rise from P1 to P2.
C) it is possible that aggregate supply will shift rightward from AS2 because nominal wage demands will rise.
D) the price level will rise from P2 to P3.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q3: One policy dilemma posed by cost-push inflation

Q7: An adverse aggregate supply shock could result

Q8: <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB6686/.jpg" alt=" Refer to the

Q9: The long-run Phillips Curve is vertical at

Q12: <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB6686/.jpg" alt=" Refer to the

Q14: In the long run, demand-pull inflation:<br>A)increases unemployment.<br>B)decreases

Q15: What will occur in the short run

Q16: Using Image 16.1 Global Perspective, which of

Q17: <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB6686/.jpg" alt=" Refer to the

Q18: In the long-run firms respond to the