Beginning at equilibrium E1 in Exhibit 1, when the government increases spending or cuts taxes the economy will experience:   Group of answer choices an inflationary recession. stagflation. cost-push inflation. demand-pull inflation.

Demand–pull inflation occurs when  increases until equilibrium output exceeds the full employment level.

When disposable income increases, consumption expenditure decreases by the same amount. does not change. also increases, and by an equal amount. also increases, but by less. also increases, and by more.   Demand-pull inflation starts with a decrease in aggregate supply. a decrease in aggregate demand. an increase in aggregate demand. an increase in aggregate supply. an increase in potential GDP.

Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks charge consumers decreases, but producers are not affected. Also in year 2, the cost of lumber used to build homes decreases. Which of the following is most likely to be the equilibrium change?   a The equilibrium will be at point C before the change in expectations and point B after the change   b The equilibrium will be at point A before the change in expectations and point B after the change   c The equilibrium will be at point A before the change in expectations and point E after the change   d The equilibrium will be at point E before the change in expectations and point A after the change