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Refer to the Figure Above

Question 146

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Refer to the figure above. If the economy is operating at full employment when its aggregate demand curve is AD<sub>2</sub>, then a further increase in consumption and investment spending will cause: A) Cost-push inflation, and the new equilibrium output will be less than Q<sub>2</sub> B) Demand-pull inflation, and the new equilibrium output will be less than Q<sub>2</sub> C) Demand-pull inflation, and the new equilibrium output will be more than Q<sub>2</sub> D) Cost-push inflation, and the new equilibrium output will be more than Q<sub>2</sub> Refer to the figure above. If the economy is operating at full employment when its aggregate demand curve is AD2, then a further increase in consumption and investment spending will cause:


A) Cost-push inflation, and the new equilibrium output will be less than Q2
B) Demand-pull inflation, and the new equilibrium output will be less than Q2
C) Demand-pull inflation, and the new equilibrium output will be more than Q2
D) Cost-push inflation, and the new equilibrium output will be more than Q2

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