Figure 35-9

question 278

Multiple Choice

Figure 35-9. The left-hand graph shows a short-run aggregate-supply SRAS) curve and two aggregate-demand AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate."
-Refer to Figure 35-9. A significant increase in the world price of oil could explain

• A) the shift of the aggregate-supply curve from AS1 to AS2, but it could not explain the shift of the Phillips curve from PC1 to PC2.
• B) the shift of the Phillips curve from PC1 to PC2, but it could not explain the shift of the aggregate-supply curve from AS1 to AS2.
• C) both the shift of the aggregate-supply curve from AS1 to AS2 and the shift of the Phillips curve from PC1 to PC2.
• D) neither the shift of the aggregate-supply curve from AS1 to AS2 nor the shift of the Phillips curve from PC1 to PC2.

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Definitions:

Uncertainty

A situation characterized by the lack of predictability or definite knowledge about an outcome or result.

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Balance Sheet Hedge

A financial strategy used to reduce the risk of currency fluctuations affecting the value of assets and liabilities reported in a company's balance sheet.

Exchange Rate Fluctuations

Variations in the value of one currency relative to another, affecting international trade and investments.