Infrastructure spending would lead to a rise in the demand of the construction

Infrastructure spending would lead to a rise in the

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rise in the demand. Infrastructure spending would lead to a rise in the demand of the construction materials and thus the price rises. As the demand of any commodity rises, the price of the commodity increases and thus there is a demand-pull inflation. 4. An inflation that is kicked off by an increase in costs is called a cost-push inflation. The two main events that create cost increases are an increase in the money wage rate and an increase in the money prices of raw materials. 7. a. According to the Phillips curve model there is inverse relationship between the unemployment rate and the inflation rate as with the increase in inflation unemployment decreases and with decrease in inflation rate unemployment increases.
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b. In the short run the Phillips curve has disappeared means the curve has flatten due to the changing dynamics of the economy that means the low unemployment will not affect the inflation rate much. While in the long run there is no tradeoff between the inflation rate and unemployment so the Phillips curve is vertical straight line. Chapter 13 9. a. A tax cut to middle-class American’s would increase their “disposable” income which would increase their spending. In turn, increasing aggregate demand and overall GDP. It would affect overall consumption and investment structure. In the temporary case the economy would receive a short-run boost as individuals work in advance of the coming rate increase. In the permanent
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