ECONOMICS
INFLATION
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Aggregate supply is perfectly elastic
|
|
|
Aggregate supply is perfectly inelastic
|
|
|
Aggregate supply is unit elastic
|
|
|
Aggregate supply is relatively elastic
|
Detailed explanation-1: -Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases. When supply cannot meet growing demand, prices for goods and services are pulled higher.
Detailed explanation-2: -When the aggregate demand in an economy strongly outweighs the aggregate supply, prices go up. This is the most common cause of inflation. In Keynesian economic theory, an increase in employment leads to an increase in aggregate demand for consumer goods.
Detailed explanation-3: -The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible. When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.
Detailed explanation-4: -When Aggregate demand is more than Aggregate supply, then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers expand the output More output means more income. Rise in output means rise in AS and rise in income means rise in AD.