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True or False: Cost-push inflation is caused by a rightward shift in the short-run
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- Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve. True or False?Complete the sentences with the correct term. Some options can be used more than once, and some may not be used at all. Cost-push inflation occurs when decreases until equilibrium output falls below the full employment level. Answer Bank As a result, the increases. aggregate price level One possible cause of cost-push inflation is an increase in imports cost of inputs To combat falling aggregate output, the government may introduce policies to increase short-run aggregate supply to where it and short-run aggregate supply intersect aggregate output at the same point. cost-push inflation These policies cause to return to its full employment level, aggregate demand long-run aggregate supply and the increases even further.In which of the following situations will demand pull inflation fall? a) Rising aggregate supply b) Reduced taxes c) Rising incomes d) Decreased imports e) Aggregate demand rising with aggregate supply lags
- which one is true Demand‑pull inflation is caused by a decrease in short‑run aggregate supply to an equilibrium point below full employment. an increase in aggregate demand to an equilibrium point below full employment. a decrease in short‑run aggregate supply to an equilibrium point beyond full employment. an increase in aggregate demand to an equilibrium point beyond full employment. Cost‑push inflation is caused by an increase in aggregate demand to an equilibrium point beyond full employment. an increase in aggregate demand to an equilibrium point below full employment. a decrease in short‑run aggregate supply to an equilibrium point beyond full employment. a decrease in short‑run aggregate supply to an equilibrium point below full employment.False QUESTION 3 Increases in the quantity of money can create demand-pull inflation. True FalseUsing aggregate supply and demand curves illustrate the different effects on output of demand-pull and cost-push inflation
- If investment as a fraction of GDP rose substantially and then stayed at a high level, what would be the effect on aggregate supply over time? It will shift both the SRAS and LRAS right. It will shift the SRAS right, but not the LRAS. It will shift the LRAS to the left, but not the SRAS. It will shift both the SRAS and the LRAS left.Question 17 If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be TT= 5+2 (11-15) TT = 5-0.5 (13-15) TT = 4 +0.5 (13-15) TT = 5 +0.5 (13-15)Inflation can be caused either by rapid growth rate of aggregate demand or by sluggish growth of aggregate supply. True or False
- Demand–pull inflation occurs when increases until equilibrium output exceeds the full employment level.The country of Freeland has an aggregate demand curve determined by the equation M + U = 6% Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. Inflation rate (%) 12 11 10 9 8 7 6 5 4 3 2 1 0 -2 -1 0 LRAS 1 2 3 3 4 5 6 Real GDP growth rate (%) prevailing inflation rate: What is the prevailing inflation rate in Freeland? AD What is the prevailing real GDP growth rate? prevailing real GDP growth rate: 7 8 9 10 % %Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, demand-pull inflation is best shown as: A) a move from a to d. B) a shift of aggregate demand from AD1 to AD2 followed by a shift of aggregate supply from AS1 to AS2. C) a shift of aggregate supply from AS1 to AS2 followed by a shift of aggregate demand from AD1 to AD2. D) a move from d to b to a.