-Refer to the Above Diagram

question 196

Multiple Choice

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the long run,demand-pull inflation could best be shown as:

• A) a move from b to c on AS₂.
• B) a move from b to f to d.
• C) a change of aggregate supply from AS₂ to AS₁.
• D) a move from b to d.

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