what is the difference in demand-pull inflation and cost-push inflation quizlet?
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Demand-pull inflation occurs when aggregate demand within the economy increases. ... Cost-push inflation occurs when the costs of production are increased (e.g. wages or oil) and the supplier forwards those costs onto consumers.
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However, the effect of excessively high demand is that businesses and employees must work beyond their maximum efficiency level to meet the level of demand. A positive output gap commonly spurs inflation in an economy because both labor costs and the prices of goods increase in response to the increased demand.
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Deflation is worse than inflation because interest rates can only be lowered to zero. Once rates have hit zero, central banks must use other tools. But as long as businesses and people feel less wealthy, they spend less, reducing demand further.
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Supply side inflation is usually refered to as 'Cost-push Inflation'. It can occur when a product that is an input to another product increases in price or value because scarcity. but it is not confined to scarcity boundaries but to certain factors of production.
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Relative Price Changes Are Not Inflation Relative-price changes, like inflation, can cause price pressure in an economy. ... A rising relative price indicates that demand is outstripping supply (or that supply is falling behind demand), while a falling relative price denotes just the opposite.
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There is no difference between the two items; they both refer to a movement along a given supply curve. ... An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' means at any given price supply has increased.
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In economics, the difference between nominal and real costs is the adjustment for inflation. Real costs account for changes in price, while nominal costs offer an assessment of quantity.
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The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible. When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.
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In equilibrium, the price level is proportional to the nominal money supply; in particular it equals the nominal money supply divided by real money demand. Similarly, the inflation rate is equal to the growth rate of the nominal money supply minus the growth rate of real money demand.
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What is the difference between a supply-push and a demand-pull sales model? ... In a supply-push model products are made prior to orders received based on estimated demand. In a demand-pull model products are not build until an order is received.
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(a) Increase in demand refers to a rise in demand due to changes in other factors, price remaining constant. (a) Decrease in demand refers to fall in demand due to changes in other factors, price remaining constant.
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There are two main types of inflation: demand pull and cost push. Fueled by income and strong consumer demand, demand-pull inflation occurs when the economy demands more goods and services than are available.
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Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
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The key difference between cost of living and inflation is that cost of living is the cost of maintaining a certain standard of living whereas inflation is the general increase in price levels in the economy.
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Inflation is a key factor in things that affect interest rates. When a surge in inflation occurs, a corresponding increase in interest rates takes place. Over time prices of things tend to steadily increase. ... When more money is spent in the economy, prices go up, naturally creating inflation.
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Also, if higher minimum wages leads to an increase in consumer spending, it could cause a degree of demand-pull inflation as well. In theory, a higher minimum wage could cause inflation for two reasons: Higher spending by workers (demand pull inflation) Higher costs for firms, leading to wage-push inflation.
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That is, inflation is equal to the growth rate in the nominal money supply (controlled by the Fed) minus the growth rate in real money demand. Notice that if the growth rate of the nominal money supply is equal to growth rate of money demand then inflation is equal to zero.