Refer to the Diagram $\mathrm { AS } _ { 2 }$

question 42

Multiple Choice

Refer to the diagram. Assume that nominal wages initially are set based on the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the short run, demand-pull inflation could best be shown as

• A) a move from b to c on A \(\mathrm { AS } _ { 2 }\)
• B) a move from b to c to d.
• C) a change of aggregate supply from A \(\mathrm { AS } _ { 2 } \text { to } A S _ { 3 } \text {. }\)
• D) a move from b to d.

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Definitions:

Inventory Account

An account on the balance sheet that represents the total cost of goods that are ready for sale, including raw materials, work-in-progress, and finished goods.

Goods Purchased

Items acquired by a company for the purpose of resale in the ordinary course of business, sometimes after undergoing further production.

Payment of Freight

This term refers to the cost associated with transporting goods, typically paid by the shipper or receiver.

Credit Terms

Credit terms are the conditions under which a seller extends credit to a buyer, detailing the repayment period, discount for early payment, and penalty for late payment.