What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?
a. Demand-side inflation is short-lived, while supply-side inflation lasts for a long time.
b. Demand-side inflation leads to budget surpluses, while supply-side inflation contributes to budget deficits.
c. Supply-side inflation is subject to control of policy makers, while demand-side inflation is beyond their reach.
d. Demand-side inflation is normally accompanied by rising real GDP, while supply-side inflation may be accompanied by falling real GDP.
d
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Which of the following explains why higher prices in the goods and services market will lead to an upward sloping short-run aggregate supply curve?
a. The higher prices will temporarily improve profit margins because many of the cost components of firms will be fixed in the short run. b. The higher prices will reduce the purchasing power of the fixed quantity of money and, thereby, stimulate additional output. c. The higher prices will expand the economy's resource base and, thereby, stimulate additional output. d. The higher prices will improve technology and, thereby, stimulate additional output.