Jane
Cost-push inflation is inflation that is caused by a significant increase in the price of an input with economy-wide importance.
Demand-pull inflation is inflation that is caused by an increase in aggregate demand.
What does M/P stands for
Real quantity of money
is a reduction in the value of money held by the public caused by inflation.
A rising overall price level is inflation.
A falling overall price level is deflation.
Disinflation is the process of bringing the inflation rate down.
The cause of cost-push inflation in an economy is_______
a shift of the short-run aggregate supply curve.
Fill in the gaps:
In the i short run an increase in the money supply increases real GDP by lowering the ----- and stimulating ------ spending and ------- spending.
Interest rate, investment, consumer
Revenue generated by the government’s right to print money is known as
In the short run- an ____ in the money supply increases _____ by lowering the interest rate and stimulating ______ and consumer spending
Which is NOT a relationship between the output gap and the unemployment rate?
A) When the output gap is positive the unemployment rate is below the natural rate.
B) When the unemployment rate is positive and below the natural rate.
C) When the output gap is negative, the unemployment rate is above the natural rate.
B) When the unemployment rate is positive and below the natural rate.
In the classical model of the price level
a. only the short-run aggregate supply curve is vertical.
b. both the short-run and long-run aggregate supply curves are vertical. only the long-run aggregate supply curve is vertical.
c. both the short-run aggregate demand and supply curves are vertical.
d. both the long-run aggregate demand and supply curves are vertical.
1)Monetary inflation occurring at a very high rate.
2)In order to avoid paying the inflation tax, people reduce their real money holdings and force the government to increase inflation to capture the same amount of real inflation tax. In some cases, this leads to an ongoing cycle of a shrinking real money supply and a rising rate of inflation. This leads to hyperinflation and a fiscal crisis.
3)Zimbabwe
potential output, the level of real GDP that the economy would produce once all prices had fully adjusted. Potential output typically grows steadily over time, reflecting long-run growth.
Why do you think that fluctuations of aggregate output around the long-run trend of potential output correspond to fluctuations in the unemployment rate around the natural rate?
When the economy is producing less than potential output— when the output gap is negative—it is not making full use of its productive resources.
other answers close to this can be accepted
a. the United States
b. periods of high inflation
c. periods of low inflation
d. recessions
e. depressions
If the inflation rate is 5%, then a year from now $1 will buy goods and services worth only about _____ today.
A positive or negative output gap occurs when an economy is producing more or less than what it would be expected as not all prices were adjusted.
Draw a correctly labeled aggregate demand and aggregate supply graph to illustrate cost-push inflation. Give an example of what might cause cost-push inflation in the economy.
1 point: Graph labeled “Aggregate price level” or “PL” on the vertical axis and “Real GDP” on the horizontal axis
1 point: AD downward-sloping and labeled
1 point: SRAS upward-sloping and labeled
1 point: LRAS vertical and labeled
Explain why a large increase in the money supply causes a larger short-run increase in real GDP in an economy that previously had low inflation than in an economy that previously had high inflation. What does this say about situations in which the classical model of the price level applies?
In a situation where inflation has been low an increase in the money supply will cause short-run expansion. It illustrates that the classical model of the price level best applies to economies with persistently high inflation.
Suppose that all wages and prices in an economy are indexed to inflation, meaning that they increase at the same rate as the price level. Can there still be an inflation tax?
Yes, there can still be an inflation tax because the tax is levied on people who hold money. As long as people hold money, regardless of whether prices are indexed or not, the government is able to use seignorage to capture real resources from the public.