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Refer to the Diagram Given Below

question 177

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Refer to the diagram given below. Refer to the diagram given below.   Assume that the nominal wages of workers are initially set on the basis of the price level P<sub>2</sub> and that the economy is initially operating at its full-employment level of output Q<sub>f</sub>.In the long run, demand-pull inflation could best be shown as: A) a movement from point b to point c on AS<sub>2</sub>. B) a movement from point a to point b. C) a shift of the aggregate supply curve from AS<sub>2</sub> to AS<sub>1</sub>. D) a movement from point b to point d. 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 Qf.In the long run, demand-pull inflation could best be shown as:


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