8. The sources of inflation During World War I and World War II, the U.S. government spent large sums of money on the war effort. Following both of these periods, the United States experienced double-digit inflation. The following diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States before the inflationary period. Shift one of the curves to illustrate the primary cause of the inflation described in the preceding paragraph. PRICE LEVEL REAL GDP AD AS | 2 | 2 ? This kind of inflation is called (demand-pull / cost-push) inflation. Inflation of this type is accompanied by (a decrease / an increase) in aggregate output.

8. The sources of inflation During World War I and World War II, the U.S. government spent large sums of money on the war effort. Following both of these periods, the United States experienced double-digit inflation. The following diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States before the inflationary period. Shift one of the curves to illustrate the primary cause of the inflation described in the preceding paragraph. PRICE LEVEL REAL GDP AD AS | 2 | 2 ? This kind of inflation is called (demand-pull / cost-push) inflation. Inflation of this type is accompanied by (a decrease / an increase) in aggregate output.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Concept explainers

Unemployment and Cost of Unemployment

Unemployment is the state of being unemployed, even when an individual is actively seeking work opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed.

Question

8. The sources of inflation
During World War I and World War II, the U.S. government spent large sums of money on the war effort. Following both of these periods, the United
States experienced double-digit inflation.
The following diagram shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States before the inflationary period.
Shift one of the curves to illustrate the primary cause of the inflation described in the preceding paragraph.
PRICE LEVEL
REAL GDP
AD
AS
8 2 4 2
This kind of inflation is called (demand-pull / cost-push) inflation. Inflation of this type is accompanied by (a
decrease / an increase) in aggregate output.

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