Based on the concept of demand-pull inflation, when the economy is at, or very close to, full-employment demand-pull inflation will occur as resources for producing become more scarce.  Demand-pull inflation is the cost of achieving full-employment in the economy.  Would you prefer to experience demand-pull inflation with a high GDP, or very low inflation and low GDP?  Why?  Which do you believe is worse - unemployment or inflation?

The graph depicts a hypothetical economy's short-run Philips curve (SRPC). Please shift the SRPC to reflect what happens when expected inflation decreases by 2 percentage points. After the shift in SRPC, what is the unemployment rate if the public expects no inflation in the economy? % Inflation rate (%) -1 -2 0 7 6 SRPC 5 4 3 2 -3 0 1 2 3 4 5 6 7 8 0 10

Starting from a zero rate of inflation, suppose some event decreases aggregate demand. Use flow diagrams and the labor market graph to explain what happens to wages and prices which results in the “wage-price spiral”. What happens to the rate of inflation?

This is commonly described as "too much money chasing too few goods." More accurately, it should be described as involving "too much money spent chasing too few goods," since only money that is spent on goods and services can cause inflation. It is the opposite of cost-push inflation. Explain how increase in government spending and increase wages for labor will lead to inflation in Ghana [HINT SUPPORT YOUR EXPLANATIONS WITH APPROPRIATE DIAGRAMS] ?