ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a monetarist new classical model
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the Keynesian model
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the short run
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the long run
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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: -Keynes recognized that the government budget offered a powerful tool for influencing aggregate demand. Not only could aggregate demand be stimulated by more government spending-or reduced by less government spending-but consumption and investment spending could be influenced by lowering or raising tax rates.
Detailed explanation-3: -The main plank of Keynes’s theory, which has come to bear his name, is the assertion that aggregate demand-measured as the sum of spending by households, businesses, and the government-is the most important driving force in an economy.
Detailed explanation-4: -The Keynesian theory implied that during a recession inflationary pressures are low, but when the level of output is at or even pushing beyond potential gross domestic product, or GDP, the economy is at greater risk for inflation.