a. Explain in your own words economic change(s) that can lead to cost-push inflation. b. Explain...

a. Explain in your own words economic change(s) that can lead to cost-push inflation.

b. Explain in your own words how an increase in consumer (household) disposable income can contribute to demand-pull inflation.

Expert Solution

Rahul Sunny answered 2 years ago

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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.

Expectations a. Explain briefly how expectations by firms of inflation can lead to inflation. b....

Expectations a. Explain briefly how expectations by firms of inflation can lead to inflation. b. Explain briefly how expectations by workers of inflation can lead to inflation. c. Explain briefly how expectations of interest rates rising can lead to interest rates rising. d. Explain briefly how expectations of exchange rates rising can lead to exchange rates rising.

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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)Which...

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a. Explain in your own words economic change(s) that can lead to cost-push inflation. b. Explain...

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