Cost-push inflation is
A. inflation caused by decreases in aggregate supply that generate an even larger decrease in aggregate demand.
B. inflation caused by increases in aggregate demand that are not matched by increases in aggregate supply.
C. inflation caused by increases in aggregate demand that generate an even larger increase in aggregate supply.
D. inflation caused by decreases in aggregate supply that are not matched by decreases in aggregate demand.
Answer: D
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Which of the following would make a reasonable hypothesis to test?
A) Rising inflation is bad for the U.S. economy. B) An inflation rate above 4% is dangerous for the British economy. C) As interest rates increase, eventually the inflation rate will decline. D) Increases in inflation are worse for the U.S. economy than are increases in public sector borrowing.
If a firm’s marginal profit is negative, it should reduce its output level.
Answer the following statement true (T) or false (F)
Contrast why negative supply shocks are more challenging for policy makers than negative demand shocks.
What will be an ideal response?