Refer to the Diagram Given Below

question 71

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 the full-employment level of output Q_f.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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