Distinguish between demand-pull inflation and cost-push inflation. Which of the two types is most likely to be associated with a negative GDP gap? Which with a positive GDP gap, in which actual GDP exceeds potential GDP?

QUESTION 17 The diagram below shows the equilibrium position of Balloon manufacturers who are operating under pure competition because one company does not have an edge over another. 90 77 50 45 D=MRAR Exhibit 21-1 10 12 20 MC ATC AVC Q 29 The maximum economic profit (or minimum economic loss) for the firm in the diagram above would be a a) loss of R540 b) loss of R480 c) loss of R60 d) loss of R490

Explain two ways in which a recession might raise the natural rate of unemployment (Macroeconomics field of question)

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?

Use two graphs in the AD-AS framework to compare and contrast demand-pull and cost-push inflation. How do their causes differ? How do the outcomes (inflation, output, employment) differ?

Suppose both nominal GDP rises by 10 percent and real GDP rise by 2percent. What has happened to the general price level? What is the inflationrate? Show your calculation.

b. Why do some people say that inflation is a tax? Who pays that tax? Who collects that tax? How does it work exactly? Does your answer depend on whether the world is best described by a general equilibrium (Classica economics) or disequilibrium (Keynesian)? c. Economists say that, in response to a wage rate increase, the overall labor supply may increase, decrease or remain unchained. Why aren't economists more certain about the consequences of something as simpl as a wage increase? d. The introduction of the ATM machine led to a period of price level increases. Why? Explain your answer intuitively. e. What is the "intertemporal labor substitution" effect (also known as the "Uber" effect)? Although you can use with a numerical example to illustrate your answer, make sure you explain it with words.

Why do some economists support some level of inflation over completely stable prices? Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers. ? Reduced risk of deflation ? Easier for firms to adjust real wages ? More opportunity for contractionary fiscal policy ? More difficult for firms to adjust real wages ? More opportunity for expansionary monetary policy

Some politicians have suggested tying the minimum wage to the consumer price index. Applying the concepts from aggregate demand and aggregate supply, what affects would this policy most likely have on output, the price level, and employment? Explain why.