Refer to the graph below. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Suppose that there is economic growth which shifts AS1 to AS2. Mainstream economists would suggest that the application of a monetary rule to keep prices constant might produce demand-pull inflation because the investment spending might:
A. Increase and cause the aggregate demand curve to shift from AD1 to AD4
B. Decrease and cause the investment demand curve to shift from AD1 to AD4
C. Increase and cause the aggregate demand curve to shift from AD1 to AD2
D. Decrease and cause the investment demand curve to shift from AD1 to AD2
A. Increase and cause the aggregate demand curve to shift from AD1 to AD4
You might also like to view...
The following graph depicts demand. 
The price elasticity of demand at point A is:
A. 2/5. B. 8/5. C. 5/8. D. 5/2.
The period between a business cycle peak and the subsequent trough is called
a. a recession. b. a complete cycle. c. an expansion. d. a change in economic trend.
Which of the following would shift the production function upward?
A. an increase in the price of oil B. an improvement in technology C. a decrease in the supply of labor D. a decline in the birth rate
The market demand in a Bertrand duopoly is P = 10 ? 3Q, and the marginal costs are $1. Fixed costs are zero for both firms. Which of the following statement(s) is/are true?
A. Profits of firm 1 = profits of firm 2. B. Producer's surplus of firm 1 = producer's surplus of firm 2. C. P = $1. D. All of the statements associated with this question are correct.