Contrast demand-pull inflation with cost-push inflation.
What will be an ideal response?
Demand-pull inflation occurs when an increase in aggregate demand (i.e., a rightward shift in the aggregate demand curve) raises the price level and increases actual real output beyond the economy’s potential output. During this temporary inflationary gap, unemployment is below the natural rate of unemployment. Cost-push inflation occurs when a negative supply shock causes a leftward shift in the short-run aggregate supply curve. The price level rises even though the aggregate demand curve does not shift. Actual real output falls below the economy’s potential output. This condition of lower growth and higher prices occurring together is called stagflation. During the temporary recessionary gap, unemployment is above the natural rate of unemployment.
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Why is the equilibrium price the best deal available for both buyers and sellers?
What will be an ideal response?
Baseballs and baseball bats are substitute goods
a. True b. False Indicate whether the statement is true or false
Public choice economists often explain low voter turnouts in terms of
A) dissatisfaction of many voters with the limited choice of candidates. B) lack of civic responsibility of the electorate. C) net costs of voting that many voters perceive. D) rational ignorance of many voters of the actual date of the elections.
When the economy goes into a recession and firms require less labor, managers tend to:
A. Reduce wages, to reflect the lower demand for labor B. Avoid cutting wages, for fear of drops in worker-productivity C. Lay off workers, and keep wages of remaining workers constant D. Keep all of their workers, by spreading work more thinly