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-Refer to the Above Diagram

Question 196

Multiple Choice

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P<sub>2</sub> and that the economy initially is operating at its full-employment level of output Q<sub>f</sub>.In the long run,demand-pull inflation could best be shown as: A) a move from b to c on AS<sub>2</sub>. B) a move from b to f to d. C) a change of aggregate supply from AS<sub>2</sub> to AS<sub>1</sub>. D) a move from b to d.
-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the long run,demand-pull inflation could best be shown as:


A) a move from b to c on AS2.
B) a move from b to f to d.
C) a change of aggregate supply from AS2 to AS1.
D) a move from b to d.

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