Refer to the Graph

question 224

Multiple Choice

Refer to the graph. Assume that the economy is initially at equilibrium at point C and that the government has adopted a hands-off policy approach. If demand-pull inflation occurs, then the final
Long-run equilibrium point will be point __; while if cost-push inflation occurs (starting at point C) , then the final long-run equilibrium point will be point __.

• A) A; C
• B) D; B
• C) A; A
• D) D; A

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Definitions:

Inventory Valuation

A method used to assess the cost or market value of inventories a company holds at the end of a period.

Inventory Accounting

The method of accounting that focuses on the valuation, recording, and management of inventory, including the cost of goods sold.

Goods Available for Sale

The total quantity of goods that a company has on hand and can sell at any given time, including both finished goods and those still in production.

FIFO Earnings

Earnings calculated based on the "First In, First Out" inventory method, where the costs of the oldest inventory items are used first in determining profit.