Use the Graph to Answer

question 4

Multiple Choice

Use the graph to answer questions
-**Which of the following fiscal policy options would have greater potential of causing inflation?

• A)An expansionary policy shifting aggregate demand from AD₁ to AD₂
• B)A contractionary policy shifting aggregate demand from AD₄ to AD₃
• C)An expansionary policy shifting aggregate demand from AD₃ to AD₄
• D)A contractionary policy shifting aggregate demand from AD₂ to AD₁

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Definitions:

Seasonal Increases

Periodic rises in business activity or demand that occur at the same time each year due to changes in season.

Accounts Receivable Period

The accounts receivable period is the average number of days it takes a company to collect payments owed by its customers.

Operating Cycle

The period of time between the acquisition of goods for production and the cash received from their sale.

Cash Cycle

The period between the outlay of cash for the purchase of inventory and the receipt of cash from accounts receivable, representing the time it takes for a company to turn its investments in inventory back into cash.