Differentiate between “demand-pull” and “cost-push” inflation in the basic aggregate demand and aggregate supply model.
What will be an ideal response?
Demand-pull inflation occurs when an increase in aggregate demand pulls up the price level. Graphically, the demand curve is shifting rightward in the intermediate or classical range of the aggregate supply curve. Cost-push inflation is a result of aggregate supply decreasing relative to aggregate demand. Graphically, the aggregate supply curve would be shifting leftward, intersecting the aggregate demand curve at a higher level of prices.
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Frictional unemployment occurs when: a. a recent graduate is searching for his first job
b. a ski instructor is looking for a part-time job during summer. c. an engineer is looking for a new job after a recession. d. a stenographer is looking for a new job as his skills have become obsolete in the current labor market.
Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high
a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iii) only
Which of the following demonstrates the income effect of a price change?
a. Sales of smartwatches rise during tax season when many consumers have tax refunds to spend. b. A store manager notes that most customers who buy a smartwatch do not purchase a second smartwatch, no matter how low the price is. c. Sales of smartwatches rise after the company introduces a new model with high utility for consumers. d. A store manager notes that when the price of the smartwatch rises, fewer consumers are interested in owning two of them.
An incentive for managers to maximize profits is:
A. performance bonuses. B. reputation. C. takeovers. D. All of the statements associated with this question are correct.