Refer to the Graph Below

question 64

Multiple Choice

Refer to the graph below. The economy is initially at equilibrium when AD₁ and AS₁ intersect. If there is cost-push inflation in the economy so that aggregate supply shifts from AS₁ to AS₂, then to reduce unemployment the government may increase aggregate demand which in the short run shifts:

• A) AD₁ to AD₂, increases the price level from P₁ to P₂, and increases real domestic output from Q₁ to Q₂.
• B) AD₁ to AD₂, increases the price level from P₂ to P₃, and increases real domestic output from Q₁ to Q₂.
• C) AD₁ to AD₂, increases the price level from P₂ to P₃, and increases real domestic output from Q₂ to Q₁.
• D) AD₂ to AD₁, decreases the price level from P₃ to P₂, and decreases real domestic output from Q₁ to Q₂.

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Definitions:

Postmature

A fetus not yet born as of 2 weeks after the due date or 42 weeks after the mother’s last menstrual period.

Postfetal

Pertaining to the stage of life or developmental phase occurring after birth.

Infant Mortality Rate

Proportion of babies born alive who die within the 1st year.

SIDS

Sudden Infant Death Syndrome, an unexplained death, usually during sleep, of a seemingly healthy baby less than a year old.