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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Explain how demand-induced, one-shot inflation may seem like supply-induced, one-shot inflation.

To determine

One-shot inflation.

Explanation

From the demand side, let us assume that when the money supply increases, it leads to an increase in the aggregate demand and result in an increase in the price level, while the price level remains unchanged in the short-run. The higher prices of goods and services induce the labors to demand for a higher wage. This results in a reduction in the supply of goods as the cost of production increases...

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