Refer to the Figure Above

question 146

Multiple Choice

Refer to the figure above. If the economy is operating at full employment when its aggregate demand curve is AD₂, then a further increase in consumption and investment spending will cause:

• A) Cost-push inflation, and the new equilibrium output will be less than Q₂
• B) Demand-pull inflation, and the new equilibrium output will be less than Q₂
• C) Demand-pull inflation, and the new equilibrium output will be more than Q₂
• D) Cost-push inflation, and the new equilibrium output will be more than Q₂

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