Refer to the Diagram

question 126

Multiple Choice

Refer to the diagram. Assume both upward and downward price and wage flexibility 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 leftward shift of curve C, followed by an upward shift of curve B.
• C) recession would involve a leftward shift of curve A.
• D) a rightward shift of curve D would be equivalent to an outward shift of the nation's production possibilities curve.

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Definitions:

Razor-And-Razor-Blade Model

A business strategy whereby a company sells a product at a low price (or gives it away for free) to drive the sales of complementary goods, such as consumables.

Intermediation Revenue Model

A business approach where a company earns income by acting as a middleman between two parties, typically in a transaction.

Introductory Offer

A special deal or promotion offered to attract new customers or to introduce a new product or service.

Operating Profit

The profit earned from a firm's core business operations, excluding deductions of interest and tax, also known as operating income or operational profit.