Exhibit 14-2 Aggregate Supply and Demand Curves

question 188

Multiple Choice

Exhibit 14-2 Aggregate supply and demand curves

-In Exhibit 14-2,the change in equilibrium from E₁ to E₂ represents:

• A) cost-push inflation.
• B) demand-pull inflation.
• C) price-push inflation.
• D) wage-push inflation.

---

Definitions:

Maximum Employment

An economic situation in which all available labor resources are being used in the most efficient way possible.

Stable Prices

A situation in the economy where prices of goods and services do not fluctuate significantly in the short term, contributing to economic stability.

Multiplier Effect

The additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending.

Government Expenditures

The total amount spent by the government for its operations, programs, and services.