Refer to the Diagram

Multiple Choice

Refer to the diagram. Assume both upward and downward price and wage flexibility in the economy. In the extended AD-AS model,

A) demand-pull inflation would involve a rightward shift of curve A, followed by a rightward shift of curve C.
B) cost-push inflation would involve a leftward shift of curve C, followed by an upward shift of curve B.
C) recession would involve a leftward shift of curve A.
D) a rightward shift of curve D would be equivalent to an outward shift of the nation's production possibilities curve.