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

question 196

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 long 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 f to d.
• C) a change of aggregate supply from A \(\mathrm { AS } _ { 2 } \text { to } \mathrm { AS } _ { 1 }\)
• D) a move from b to d.

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Definitions:

Hot Springs

Natural pools of water heated by geothermal forces from the Earth's interior.

Convergent Boundary

A tectonic plate boundary where two plates move toward one another, often resulting in mountain building, earthquakes, and volcanic activity.

Volcanism

The geological process through which magma and associated gases and ashes are expelled onto the Earth's surface or into the atmosphere.

Sinkholes

Natural depressions or holes in the Earth's surface caused by the removal of soil and bedrock, often due to water erosion.