Use the following diagram to answer the following questions.
-Refer to Diagram 14-2. In the above diagram, which of the following illustrates inflation caused by the activity of labor unions?
A) an shift in aggregate demand from AD₁ to AD₂ due to the increased purchasing power of union members.
B) a shift in aggregate demand from AD₁ to AD₂ due to the increased quality of union products.
C) a shift in aggregate supply from AS₂ to AS₁ due to the restriction of employment opportunities by unions.
D) a shift in aggregate supply from AS₁ to AS₂ due to union activity which forces wages up.
Correct Answer:
Verified
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