MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Question
Chapter 9, Problem 11RQ
To determine
The type of inflation leading to reduction in real output.
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Will the following lead to cost-push or demand-pull inflation? (a) The discovery of a large and rich vein of gold in the banks of Lagan(b) More militancy in wage demands by trades unions(c) A fall in output as a result of a prolonged lockdown of business while the government pays for salaries of furloughed workers(d) A higher tax on microchips(e) Increasing industrial concentration leading to oligopolistic industrial structures
Give proper explanations.
In the quantity theory, inflation does all of the adjusting. Recall that
M* + v* = Inflation + real growth.
a. Consider the nation of Kydland. Before the shock to Kydland’s economy, M* = 10%, v* = 3%, real growth = 4%. What is inflation?
Inflation is
%.
Which policy measure may reduce demand-pull inflation but increase cost-push inflation? Pick a,b,c, or d
A. A rise in government spending on training
B. A decrease in import tariffs
C. A rise in the rate on interest
D. A decrease in corporation tax
Chapter 9 Solutions
MACROECONOMICS (LL)
Ch. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - Prob. 5DQCh. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQ
Ch. 9 - Prob. 11DQCh. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQCh. 9 - Prob. 11RQCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8P
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Similar questions
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- With the aid of graphs, explain: (a) demand-pull inflation (b) cost-push inflation.arrow_forwardWhat type of inflation is caused by an increase in the purchasing power of people? a. Cost push b. Demand pull c. Built in d. Chronicarrow_forward(c). Consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to ??. Explain the mechanisms behind the adjustment to the new steady state.arrow_forward
- The price-wage spiral is associated with which type of inflation? a. Cost push b. Demand pull c. Built in d. Chronicarrow_forwardwhen the production increases inflation goes up, however, mv=py and change in p=chaneg in m + change in v -change in y? when a change in y increases, inflation should go down? A detailed and specific answer, please.arrow_forwardExplain one harm associated with unexpected inflation that is not associated with expected inflation. Then explain one harm associated with both expected and unexpected inflation.arrow_forward
- Let's say the inflation rate in an economy turns out to be higher than expected. Will the following people, or bank, be affected? Helped, hurt, or unaffected? a. Someone keeping a large quantity of cash in a shoe box in their closet. b. A bank lending money at a fixed rate of interest c. A union member with a COLA wage contract d. A person who is not due to receive a pay raise for another 11 monthsarrow_forwardRead the following statement and answer questions 17 and 18:Oil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China.Question 17 (4 Marks)With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationQuestion 18 (4 Marks)What is one of the potential effects of the aforementioned inflation on the South African economy?A. Decreased purchasing power of money.B. Increased consumer savings.C. Reduced interest rates on loans.D. Higher demand for imports.arrow_forwardWill the following lead to cost-push or demand-pull inflation? (5%)(a) The discovery of a large and rich vein of gold in the banks of Lagan (b) More militancy in wage demands by trades unions (c) A fall in output as a result of a prolonged lockdown of business while the government pays for salaries of furloughed workers (d) A higher tax on microchips (e) Increasing industrial concentration leading to oligopolistic industrial structuresarrow_forward
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