Exhibit 7-1 -In Exhibit 7-1 the Economy Is Initially Facing AD₀ and

Multiple Choice

Exhibit 7-1
-In Exhibit 7-1 the economy is initially facing AD₀ and AS₀.Which of the following best describes the occurance of cost-push inflation?

A) The aggregate demand curve shifts to AD₁.
B) The agregate supply curve shifts to AS₁.
C) The aggregate demand curve shifts to AD₁ and the aggregate supply curve shifts to AS₁.
D) The aggregate demand curve shifts to AD₂.
E) The aggregate supply curve shifts to AS₂.