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:
A) a leftward shift of aggregate supply from AS2 to AS3.
B) a move from b to c on AS2.
C) a move from b to c to d.
D) a move from b to f to d.
Correct Answer:
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A)
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