Consider the AD/AS Model Below with a Constant Rate of Inflation

question 70

Multiple Choice

Consider the AD/AS model below with a constant rate of inflation. No exogenous AD or AS shocks are occurring.
FIGURE 29-1
-Refer to Figure 29-1. What explains the movement of the AD curve from AD0 to AD1 to AD2 and so on?

• A) increasing nominal wages cause desired consumption to increase, shifting the AD curve to the right
• B) desired investment is increasing, shifting the AD curve to the right
• C) the central bank is attempting to reduce inflation by removing monetary validation
• D) the process of disinflation
• E) the central bank is increasing the money supply and validating the inflationary expectations

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