Core inflation refers to the inflation picture after stripping away the:

Suppose the economy is initially experiencing a recessionary gap. A reduction in the size of the budget deficit will cause which of the following in the short run?

A) a reduction in the size of the recessionary gap and increase in real GDP. B) an increase in the size of the recessionary gap and decrease in real GDP. C) an increase in inflation and increase in aggregate supply. D) an inflationary gap.

The underlying cause of inflation is

A. labor unions demanding higher wages. B. businesses charging higher prices. C. government raising taxes. D. increasing aggregate demand.