Refer to the Diagram $\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 3 }$

question 176

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, costpush inflation could best be shown as

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

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Definitions:

Net Operating Income

The profit a company makes from its operations, excluding non-operational revenues and expenses like interest and taxes.

Variable Costing

An accounting method that only includes variable production costs—material, labor, and overhead—in product cost calculations, excluding fixed costs.

Fixed Manufacturing Overhead

The sum of all production costs that do not change with the level of output, including salaries, rent, and utility expenses of a manufacturing facility.

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of producing goods.