Refer to the Graph $A D _ { 1 } \text { and } A S _ { 1 }$

question 88

Multiple Choice

Refer to the graph. Suppose that the economy is at an initial equilibrium where the AD $A D _ { 1 } \text { and } A S _ { 1 }$ curves intersect. Demand-pull in?ation in the long run can best be illustrated as a shift of

• A) \(\mathrm { AS } _ { 1 } \text { to } \mathrm { AS }_2 \text {, and back again to } \mathrm { AS } _\text {1}.\)
• B) \(A D _ { 1 } \text { to } A D _ { 2 } \text {, and back again to } A D _ { 1 } \text {. }\)
• C) \(\mathrm { AS } _ { 1 } \text { to } \mathrm { AS } _ { 2 } \text {, consequently making } A D _ { 1 } \text { shift to } A D _ { 2 }\)
• D) \(\mathrm { AD } _ { 1 } \text { to } A \mathrm { D } _ { 2 } \text {, consequently making } \mathrm { AS } _ { 1 } \text { shift to } \mathrm { AS } _ { 2 } \text {. }\)

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Definitions:

Equity

The residual interest in the assets of an entity after deducting liabilities, often referred to as shareholder's equity or owner's equity.