Inflation, Unemployement And The Business Cycle Flashcards
1
Q
How does inflation occur in the long run
A
When the quantity of money grows faster than the potential GDP
2
Q
What are the two sources of inflation in the short run
A
Demand-pull inflation
Cost-push inflation
3
Q
What is demandxpull inflation
A
An inflation that starts because aggregate demand increases
4
Q
What are the two main reasons of increased costs
A
An increase in the money wage rate
An increase in the money price of raw material
5
Q
What is stagflation
A
The combination of an increasing price level and a decreasing real GDP
6
Q
What happens in the business cycle if inflation forecast is correct
A
Economy behaves like it does in a full employment
7
Q
What happens in the business cycle if
A
