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Inflation Question and Answers1. If the economy is producing at capacity and consumers are willing and able to buy more, this may cause A. Demand-pull inflation.B. Cost-push inflation.C. Supply-side inflation.D. The price effect.Excess demand that results in an increasing price level is known as demand-pull inflation.2. If OPEC raises the price of oil and production costs increase, this may cause Cost-push inflation occurs when input costs rise, leading producers to raise prices to maintain profitability.3. All of the following are microeconomic consequences of inflation exceptPrices, incomes, and wealth change due to changes in inflation, while profit is based more on the difference in revenue and cost, and there is no profit effect.