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

question 42

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, 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 c to d.
• C) a change of aggregate supply from A \(\mathrm { AS } _ { 2 } \text { to } A S _ { 3 } \text {. }\)
• D) a move from b to d.