Refer to the diagram. Assume both upward and downward price and wage ﬂexibility in the economy. In the extended AD-AS model,
A) demand-pull inﬂation would involve a rightward shift of curve A, followed by a rightward shift of curve C.
B) cost-push inﬂation would involve a leftward shift of curve C, followed by an upward shift of curve B.
C) recession would involve a leftward shift of curve A.
D) a rightward shift of curve D would be equivalent to an outward shift of the nation's production possibilities curve.

Question

Refer to the diagram. Assume both upward and downward price and wage ﬂexibility in the economy. In the extended AD-AS model,
A) demand-pull inﬂation would involve a rightward shift of curve A, followed by a rightward shift of curve C. 
B) cost-push inﬂation would involve a leftward shift of curve C, followed by an upward shift of curve B. 
C) recession would involve a leftward shift of curve A. 
D) a rightward shift of curve D would be equivalent to an outward shift of the nation's production possibilities curve.

Quizplus · Accepted Answer

The Answer of  Refer to the diagram. Assume both upward and downward price and wage ﬂexibility in the economy. In the extended AD-AS model,
A) demand-pull inﬂation would involve a rightward shift of curve A, followed by a rightward shift of curve C. 
B) cost-push inﬂation would involve a leftward shift of curve C, followed by an upward shift of curve B. 
C) recession would involve a leftward shift of curve A. 
D) a rightward shift of curve D would be equivalent to an outward shift of the nation's production possibilities curve.

Refer to the Diagram