The circuit demodulates an AM (DSBFC) signal using a diode half-wave rectifier followed by an RC circuit. This is known as an envelope detector.
The carrier frequency of 500 kHz is close to 455 kHz standard AM broadcast receiver IF. The relatively high modulating signal frequency of 10 kHz was chosen so that the waveform can still show the sinusoidal form of the modulated signal.
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