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

question 196

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 long 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 f to d.
• C) a change of aggregate supply from A \(\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }\)
• D) a move from b to d.

---

Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal installments.

Mutually Exclusive

A statistical term describing two or more events that cannot occur simultaneously.

Salvage Value

The estimated residual value of an asset at the end of its useful life, important for depreciation calculations.

Internal Rate Of Return (IRR)

The discount rate that makes the NPV of an investment zero.