Refer to the Above Diagrams

question 95

Multiple Choice

Refer to the above diagrams.The solid lines are production possibilities curves; the dashed lines are trading possibilities curves.The data contained in the production possibilities curves are based on the assumption of:

• A)imperfect substitutability of resources as between beer and pizza production.
• B)constant costs.
• C)decreasing costs.
• D)increasing costs.

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Definitions:

Inflation

An increase in the general price level of goods and services in an economy over a period of time.

Cost-Push Inflation

Inflation resulting from a rise in the cost of inputs such as labor, raw materials, and so forth, which subsequently reduces the availability of these goods.

Aggregate Demand Curve

A graphical representation showing the total demand for all goods and services in an economy at different price levels.

Aggregate Supply Curve

A graphical representation that shows the total quantity of goods and services producers are willing to supply at different price levels in an economy.