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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Definitions:

Transactions

Financial activities or events that affect the financial position of the company.

Owner's Equity Accounts

Accounts representing the owner’s claim or interest in the business assets after all liabilities have been deducted.

Credits

Entries on the right side of an account, indicating an increase in liabilities, equity, or revenue, or a decrease in assets or expenses.

Posting Reference Notation

A unique code or number used to track the entry of a transaction in the accounting records to its source document.