-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point ________ and to point ________.
A) E when aggregate demand increases; D when the money prices of raw materials rise
B) C when the money prices of raw materials rise; D when aggregate demand increases
C) F when the money prices of raw materials rise; E when aggregate demand increases
D) B when aggregate demand decreases; C when the money prices of raw materials rise

Question

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point ________ and to point ________.
A) E when aggregate demand increases; D when the money prices of raw materials rise 
B) C when the money prices of raw materials rise; D when aggregate demand increases 
C) F when the money prices of raw materials rise; E when aggregate demand increases 
D) B when aggregate demand decreases; C when the money prices of raw materials rise

Quizplus · Accepted Answer

A cost-push rise in the price level, such as when the money prices of raw materials rise, initially moves the economy to point C, reflecting higher costs and lower output. This is different from a demand-pull situation, where an increase in aggregate demand would move the economy to a different point, not mentioned in the given options.

-The Figure Above Shows the Aggregate Demand, Short-Run Aggregate Supply