Explain “cost-push” inflation using aggregate demand–aggregate supply analysis.
What will be an ideal response?
“Cost-push” inflation using the AD–AS analysis could be explained by a leftward shift in the aggregate supply curve. If aggregate supply decreases in this manner, it will intersect the aggregate demand curve at a lower real GDP and a higher price level since the aggregate demand curve is down sloping. This view suggests that prices might rise even if aggregate demand has not increased. The more traditional view has been that inflation is caused by increases in aggregate demand at or near the full-employment level of GDP.
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What is the diamond-water paradox?
What will be an ideal response?
In the Solow growth model, an increase in the marginal propensity to consume shifts the ________, with the implied change in the capital stock resulting in a ________ standard of living in the long run
A) steady-state investment line upward, higher B) steady-state investment line downward, higher C) national saving line upward, lower D) national saving line upward, higher E) national saving line downward, lower