Refer to the Graph Below

question 59

Multiple Choice

Refer to the graph below. Assume that the economy is in initial equilibrium where AS₁ intersects AD₁. Then a supply shock occurs that shifts AS₁ to AS₂. If the government counters with an expansionary fiscal policy that shifts AD₁ to AD₂, then it is most likely that:

• A) AD₂ will shift to AD₁.
• B) AS₂ will shift to AS₁.
• C) AS₂ will shift to AS₃.
• D) AS₂ will shift to AS₃ and AD₂ will shift to AD₁.

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Definitions:

Price Fixing

A practice where companies conspire to keep prices at a certain level, often higher than would naturally occur in a competitive market, which is illegal in many jurisdictions.

Poor Service

Substandard service delivery that fails to meet customer expectations or requirements.

Value Chain Management

The process of managing activities and processes to create value for customers, from product design to final sales and after-sales service.

Supply Chain Management

The management of the flow of goods and services, involving the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption.