demand pull inflation

Question 1

what is inflation in the uk currently

Answer 1

1.7%

Question 2

define demand pull inflation

Answer 2

occurs when there’s excess AD such as positive output gap

Question 3

how do businesses respond to high demand

Answer 3

by raising prices to increase profit margins

Question 4

what is demand pull inflation associated with

Answer 4

the boom phase of the cycle, when sras becomes inelastic

Question 5

how is the depreciation of the exchange rate a cause of demand pull inflation

Answer 5

increases price of imports and reduces foreign price of Uk exports.

Question 6

how is a reduction in direct/indirect taxes a cause of demand pull inflation

Answer 6

consumers will have more disposable income increasing demand

Question 7

how is rising consumer confidence and an increase in rate if growth of house prices a cause of demand pull inflation

Answer 7

wealth effect

Question 8

how is faster rate of economic growths in other countries a cause of demand pull inflation

Answer 8

providing a boost to Uk exports overseas

Question 9

give an example of wealth effect

Answer 9

take mortgage to buy house house prices increases you have access to more money increases disposable income but supply stays the same

Question 10

causes of demand pull inflation

Answer 10

reduction in indirect direct tax
faster ecoonomic growth
depreciation of exchange rate
rapid growth or money supply
rising consumer confidence