This essay focuses on two types of inflation. Economists distinguish between two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. Both types of inflation cause an increase in the overall price level within an economy.
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Assignment for Business Economics [AFE7504-A] Question 1: In which ways do you think the minimum wage may impact the level of employment and inflation in an economy? Cite comparative examples of the developing and the developed economies to support your assertions.(50 marks) Question 2: How do the main components of aggregate demand contribute to GDP growth? Which elements of the aggregate demand do you think caused the global economic recession during the Covid-19 pandemic?.
Economists distinguish between two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. Both types of inflation cause an increase in the overall price level within an economy.
Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy’s productive capacity. One potential shock to aggregate demand might come from a central bank that rapidly increases the supply of money. See Chart 1 for an illustration of what will likely happen as a result of this shock. The increase in money in the economy will increase demand for goods and services from D0 to D1. In the short run, businesses cannot significantly increase production and supply (S) remains constant. The economy’s equilibrium moves from point A to point B and prices will tend to rise, resulting in inflation.
details;
firstly, demand
secondly, supply
thirdly, money
finally, money
lastly, economy