Refer to the Diagram and Assume That Prices and Wages

question 213

Multiple Choice

Refer to the diagram and assume that prices and wages are flexible both upward and downward in the economy. In the extended AD-AS model,

• A) demand-pull inflation would involve a rightward shift of curve A, followed by a rightward shift of curve C.
• B) cost-push inflation would involve first a leftward shift of curve C, then a rightward shift of curve C.
• C) recession would involve a leftward shift of curve A, followed by a leftward shift of curve C.
• D) recession would involve a rightward shift of curve D, followed by leftward shifts of curves A and C.

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Definitions:

Mining Rights

Legal permissions granted to extract minerals, oil, or gas from the land, potentially involving leasing or ownership arrangements.

Depletion Expense

The process of transferring the cost of natural resources to an expense account.

Accumulated Depletion

The total amount of resource extraction accounted for as an expense over time, reducing the asset's value.

Straight-Line Method

An approach for calculating depreciation of an asset, which spreads the cost evenly over its useful life.