Refer to the Graph $P _ { 1 } \text { to } P _ { 2 } \text { and real output will be } Q _ { 2 } \text {. }$

question 138

Multiple Choice

Refer to the graph. Assume that the economy is initially at full-employment equilibrium at point A. If there is cost-push in?ation in this economy and the government pursues an expansionary ?scal
Policy, then in the long run the

• A) price level will rise from \(P _ { 1 } \text { to } P _ { 2 } \text { and real output will be } Q _ { 2 } \text {. }\)
• B) price level will rise from \(P _ { 1 } \text { to } P _ { 3 } \text { and real output will be } Q _ { 1 } \text {. }\)
• C) price level will rise from \(P _ { 1 } \text { to } P _ { 2 } \text { and real output will be } Q _ { 3 } \text {. }\)
• D) price level will be \(P _ { 1 } \text { and real output will be } Q _ { 1 } \text {. }\)

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