Demand-pull inflation Demand-pull inflation occurs when:       A.  input costs rise.     B.  unemployment is above the natural rate.     C.  people incorrectly forecast inflation.     D.  aggregate demand increases.

1) Whether you gain or lose during a period of inflation depends on: a) how the price increases affect government purchases of goods. b) whether the economy is expanding or contracting. c) whether you save or not. d) whether your income rises faster or slower than prices of the things you buy. 2) A real wage that does not keep pace with inflation implies: a) a decrease in purchasing power. b) a decrease in nominal wages. c) a decrease in nominal wages after inflation. d) an increase in the inflation adjusted real wage.

Explain TWO costs of inflation from an economist’s perspective.

With the aid of graphs, explain: (a) demand-pull inflation (b) cost-push inflation.