(Figure: Demand Shock A) When the Economy Moves from a to B

question 27

Multiple Choice

(Figure: Demand Shock A) When the economy moves from A to B, as shown in the graph on the left, how will inflation and the unemployment rate be affected, as shown in the graph on the right?

• A) There will be movement on the curve, so that inflation increases and unemployment decreases.
• B) There will be movement on the curve, so that inflation decreases and unemployment increases.
• C) The curve will shift left, so that both unemployment and inflation decrease.
• D) The curve will shift right, so that both unemployment and inflation increase.

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Definitions:

Paid-in Capital

The amount of money that shareholders have invested in a company in exchange for ownership, excluding earnings or retained profits.

Retained Earnings Appropriation

Portions of retained earnings that are set aside for specific purposes, such as future expansion or debt repayment, indicating they are not available for dividend distribution.

Board of Directors

A group of individuals elected by shareholders to oversee the management and make major decisions for a corporation.

Prior Period Adjustment

Correction made in the current year of a mistake made in previous years. The adjustment is updated on the statement of retained earnings.