Refer to the Diagram Given Below

question 177

Multiple Choice

Refer to the diagram given below. 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 its full-employment level of output Q_f.In the long 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 a to point b.
• C)a shift of the aggregate supply curve from AS₂ to AS₁.
• D)a movement from point b to point d.

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Definitions:

Period Cost

An expense that is not directly tied to the production process but rather incurred over a specific time period.

High-low Method

A technique used in accounting and finance to estimate variable and fixed costs based on the highest and lowest levels of activity.

Total Fixed Costs

The sum of all costs that do not change with the level of production or sales, over a specified period of time.

Manufactures

Companies or individuals involved in the conversion of raw materials into finished goods, through the use of labor and machinery.