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10SQ12 (take home)

10SQ12 (take home) - Consider the case of rising government...

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Econ. 1A.Quiz 12. Name: _________________________. ID: ______________________. Due: In the beginning of next Monday ‘s class. Inflation is a serious economic problem because it increases the cost of living, redistributes income and wealth, and diverts resources from production. There are two sources of inflation: (1) demand pull inflation; (2) cost-push inflation.
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Unformatted text preview: Consider the case of rising government purchase (G) sharply. Please use the LAS-SAS-AD model to show how this event can generate the demand- pull inflation. [Please show your answer verbally and graphically]. (a) Explain initial effect, money wage rate response and one-time result carefully [6]. (b) Explain Demand-pull inflation proceeds carefully . [6]...
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