8. The sources of inflation During World War I and World War II, the U.S. government spent large sums of money on the war effort. Following both of these periods, the United States experienced double-digit inflation. The following diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States before the inflationary period. Shift one of the curves to illustrate the primary cause of the inflation described in the preceding paragraph. PRICE LEVEL REAL GDP AD AS | 2 | 2 ? This kind of inflation is called (demand-pull / cost-push) inflation. Inflation of this type is accompanied by (a decrease / an increase) in aggregate output.

8. The sources of inflation During World War I and World War II, the U.S. government spent large sums of money on the war effort. Following both of these periods, the United States experienced double-digit inflation. The following diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States before the inflationary period. Shift one of the curves to illustrate the primary cause of the inflation described in the preceding paragraph. PRICE LEVEL REAL GDP AD AS | 2 | 2 ? This kind of inflation is called (demand-pull / cost-push) inflation. Inflation of this type is accompanied by (a decrease / an increase) in aggregate output.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 36P: If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor...

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The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows. Plot the AD/AS diagram. Identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?
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7 Find and describe an inflation contemporary issue of supply and demand into three paragraphs with empirical facts including proper sources and citations related to macroeconomics as well as interesting.
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