What is the term used to describe a situation where inflation is very low or negative? a) Deflation b) Hyperinflation c) Stagflation d) Disinflation
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- Define Inflation. Explain why inflation is a macroeconomic concernWhat can be used to reduce aggregate demand and thereby control demand pull inflation? One wordThere is currently a political and academic controversy whether or not stimulus packagesagainst the Covid-induced economic recession will cause inflation. Professor OlivierBlanchard has warned that the stimulus package of the US-administration may lead toinflation in the US. However, he does not see inflation dangers emanating from stimulusprograms in the Eurozone. The Next Generation EU program is not only considered to be a stimulus program but also tobe a growth program, which by spending on infrastructure and climate-related investmentsis expected to lead to an increase in potential output.Analyze in an AD-AS model the impact of economic growth on actual GDP and the pricelevel. Also elaborate on the role that an additional demand stimulus could play.
- Why does the “quality/new goods bias” arise if we calculate the inflation rate based on a fixed basket of goods?Suppose the public believes that a newly announcedanti-inflation program will work and so lowers itsexpectations of future inflation. What will happen toaggregate output and the inflation rate in the short run?Which substitute we may use if future prices are not expected to follow thegeneral inflation rate?
- When an economy approaches full employment, why does demand-pull inflation become a problem? Explain.Harare Zimbabwe's central bank today raised its key intrest rate from 50 percent to 70 percent. The governor of the Reserve Bank of Zimbabwe said the higher rate was inteded to slow consumer spedning, increase foreign buying of Zimbabwe dollars, and slow the rate of inflation, currently running at approximately 200 percent a year. According to the World View after the key intrest rate was raised what was, a) the nominal intrest rate? b) the real intrest rate?"Q. Explain why economists consider inflation at too high a level to be a bad thing.
- How do the disinflationary policies differ depending on the causes of inflation?Refer to the accompanying figure. LRAS Inflation a A 0, y' Output O O An economy is currently in long-run equilibrium at point B, at an inflation rate of m, which is too high to sustain economic growth. If an anti-inflationary policy is enacted, the economy will be in short-run equilibrium at point creating gap. O SRAS O SRAS AD' AD A; an expansionary A; a recessionary D; a recessionary D; an expansionaryWhat is the difference between cost-push inflation and demand-pull inflation? Explain the demand-pull inflationary process.