Does inflation result from increases in aggregate demand, short-run aggregate supply, or long-run aggregate supply?
What will be an ideal response?
Inflation results from increases in aggregate demand that exceed the increase in long-run aggregate supply. As the aggregate demand curve shifts rightward the price level rises. Increases in AD that exceed increases in LAS produce inflation.
You might also like to view...
Refer to Figure 23-3. Suppose that investment spending decreases by $5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then what is the change in GDP?
A) -$4 million B) -$5 million C) -$25 million D) -$40 million
A ________ is a provision that restricts or specifies certain activities that a borrower can engage in
A) residual claimant B) risk hedge C) restrictive barrier D) restrictive covenant
Adam Smith's idea of the "invisible hand" says that given a country's resources and its initial distribution of wealth, the use of markets will
A) insulate a nation from the effects of political instability. B) eliminate problems of hunger and dissatisfaction. C) eliminate inequalities between the rich and the poor. D) make people as economically well off as possible.
If Health Spas charges an annual membership fee of $1,000 for the use of their facilities and charges a $20 fee each time a member uses their facilities, this is an example of ________.
A) a single pricing scheme B) two-part pricing C) commodity bundling D) an all-or-nothing offer