Question

In: Economics

Cost-push inflation is a situation in which the:

1.

Cost-push inflation is a situation in which the:

 

  short-run aggregate supply curve shifts rightward.

  short-run aggregate supply curve shifts leftward.

  aggregate demand curve shifts leftward.

  aggregate demand curve shifts rightward

 

2. Which of the following tends to make aggregate demand decrease by more than the amount that consumer spending decreases?

 

  the interest rate effect

  the crowding-out effect

  the wealth effect

  the multiplier effect

3.

(Figure: Aggregate Demand Shift)

Aggregate Price Level (P) o 1,000 5,000 2,000 3,000 4,000 5,000 Aggregate Output (Q)
Which of the following may be an explanation for the shift in aggregate demand from line A to line B?

Prices fall and increase real wealth.

  Consumer confidence declines and consumption spending falls.

  Interest rates fall and boost investments.

  Goods and services become less competitive and exports fall.

Solutions

Expert Solution

1) ans is B. Cost push inflation is a situation where supply curve shifts leftward. Cost of production increases which will shift the aggregate supply curve to the left.

2)ans is D Multiplier is the change in income due to change in consumer spending

3)ans is C. When interest rate falls it will increase the investment rate and increase the aggregate demand and demand curve shifts to the right from line A to B.


Related Solutions

What is cost-push inflation? What factors can start a cost-push inflation? What must the Fed's response...
What is cost-push inflation? What factors can start a cost-push inflation? What must the Fed's response be for the inflation to continue?
Define cost-push inflation. Using the AS/AD model, explain how cost-push inflation affects the level of aggregate...
Define cost-push inflation. Using the AS/AD model, explain how cost-push inflation affects the level of aggregate output and the price level in the economy. Suppose that the government uses expansionary fiscal policy to counter the effects of the cost-push inflation. Indicate using the AS-AD model the impact of this policy on the price level and level of aggregate output.
Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely to...
Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely to be associated with a negative GDP gap? Which with a positive GDP gap, in which actual GDP exceeds potential GDP? What is core inflation? Why is it calculated?
2. Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely...
2. Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely to be associated with a negative GDP gap? Which with a positive GDP gap, in which actual GDP exceeds potential GDP? What is core inflation? Why is it calculated?(answer in your own words)
Why does everyone lose to cost-push inflation?
Why does everyone lose to cost-push inflation?
Question 1 (Inflation and the Macroeconomy) Distinguish between demand-pull inflation and cost-push inflation and then use...
Question 1 (Inflation and the Macroeconomy) Distinguish between demand-pull inflation and cost-push inflation and then use an AD-AS (aggregate demand/aggregate supply) model to illustrate the theoretical effects of these two types of inflation on the price level (P), employment (L) and economic growth (real GDP) in the short run. Now identify the various factors that have contributed towards demand-pull inflation and cost-push inflation in South Africa and critically analyse whether they are consistent with the predictions of the AD-AS model.
What is the difference between cost-push and demand-pull inflation?
What is the difference between cost-push and demand-pull inflation?
What is the difference between demand-pull inflation and cost-push inflation? Why is a high rate of...
What is the difference between demand-pull inflation and cost-push inflation? Why is a high rate of inflation bad for the economy?
Define and explain the concept of Inflation and describe the difference between demand-pull and cost-push inflation
Define and explain the concept of Inflation and describe the difference between demand-pull and cost-push inflation
Explain in detail: A) the differences between demand-pull inflation and cost-push inflation. B). Analyze the differences...
Explain in detail: A) the differences between demand-pull inflation and cost-push inflation. B). Analyze the differences between cost-push inflation and built-in inflation.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT