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Refer to the Diagram Below

question 97

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Refer to the diagram below. 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 Qf. In the short run, cost-push inflation could best be shown as: Refer to the diagram below. Assume that nominal wages initially are set on the basis of the price level P<sub>2</sub> and that the economy initially is operating at its full-employment level of output Q<sub>f</sub>. In the short run, cost-push inflation could best be shown as:   A)  a leftward shift of aggregate supply from AS<sub>2</sub> to AS<sub>3</sub>. B)  a move from b to c on AS<sub>2</sub>. C)  a move from b to c to d. D)  a move from b to f to d.


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