Refer to the Diagram for a Specific Economy

question 74

Multiple Choice

Refer to the diagram for a specific economy. The shape of this curve suggests that

• A) the price level rises at a diminishing rate as the level of aggregate demand increases.
• B) full employment and price stability are compatible goals only when aggregate demand is falling.
• C) each successive unit of decline in the unemployment rate is accompanied by a smaller increase in the rate of inflation.
• D) each successive unit of decline in the unemployment rate is accompanied by a larger increase in the rate of inflation.

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Definitions:

Rapid

Characterized by great speed or quickness of movement or action.

Molten

Melted.

Melted

Refers to a solid substance that has been turned into a liquid by heating.

Friction

The resistance that one surface or object encounters when moving over another, often generating heat.