VCC Economics Assignment 05

VCC Economics Assignment 05 - Don Uhrig Principles of...

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Don Uhrig Principles of Economics-Macro, ECO-2013, Su 1700-1945 Professor Dr. Jim Chase Assignment #5 Define cost-push and demand-pull inflation: The terms cost-push inflation and demand-pull inflation are associated with Keynesian Economics. Inflation is caused by a combination of four factors. Those factors are: (1) the supply of money goes up; (2) the supply of goods goes down; (3) demand for money goes down; and (4) demand for goods goes up. Definition of Cost-Push Inflation: Inflation can result from a decrease in aggregate supply. The two main sources of decrease in aggregate supply are: (1) an increase in wage rates; and (2) an increase in the prices of raw materials. These sources of a decrease in aggregate supply operate by increasing costs, and the resulting inflation is called cost-push inflation. Other things remaining the same, the higher the cost of production, the smaller is the amount produced. At a given price level, rising wage rates or rising prices of raw materials such as oil lead firms to decrease the quantity of labor employed and to cut production. Aggregate supply is the total value of the goods and services produced in a country or simply
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This note was uploaded on 07/23/2010 for the course ECON ECO2013 taught by Professor during the Fall '09 term at Valencia.

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VCC Economics Assignment 05 - Don Uhrig Principles of...

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