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Refer to the Diagram Given Below

Question 71

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Refer to the diagram given below. Refer to the diagram given below. Assume that the nominal wages of workers are initially set on the basis of the price level P<sub>2</sub> and that the economy is initially operating at the full-employment level of output Q<sub>f</sub>.In the short run, demand-pull inflation could best be shown as: A) a movement from point b to point c on AS<sub>2</sub>. B) a movement from point b to point d. C) a shift of the aggregate supply curve from AS<sub>2</sub> to AS<sub>3</sub>. D) a shift of the aggregate supply curve from AS<sub>1</sub> to AS<sub>2</sub>. Assume that the nominal wages of workers are initially set on the basis of the price level P2 and that the economy is initially operating at the full-employment level of output Qf.In the short run, demand-pull inflation could best be shown as:


A) a movement from point b to point c on AS2.
B) a movement from point b to point d.
C) a shift of the aggregate supply curve from AS2 to AS3.
D) a shift of the aggregate supply curve from AS1 to AS2.

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