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.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: The Short-run Trade-off Between Inflation And Unemployment
Section: Chapter Questions
Problem 6CQQ
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