Refer to the Diagram and Assume That Prices and Wages

question 228

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 a rightward shift of curve A, followed by a leftward shift of curve C.
• C) recession would involve a leftward shift of curve A, followed by a rightward 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:

Alcohol

A psychoactive substance commonly found in beverages like beer, wine, and spirits, known for its intoxicating effects.

Tranquilizers

Medications used to reduce tension or anxiety, often by depressing the central nervous system.

Barbiturates

A class of drugs that act as central nervous system depressants, often used for their sedative and anxiolytic effects.

Depressants

A category of drugs that reduce the activity of the central nervous system, leading to effects such as relaxation, sedation, and decreased alertness.