This assignment is for Module 8 and covers Chapter 28 from the text. Students should answer all questions. All questions
are of equal value.
Question 1
a) Define demand-pull inflation.
b) Explain and use two separate AS/AD diagrams to show the initial (short-run) effect and the money wage adjustment
(long-run) effect of an increase in aggregate demand.
Question 2
Explain and use an AS/AD diagram to show a demand-pull inflation spiral.
Question 3
a) Define cost-push inflation.
b) Explain and use an AS/AD diagrams to show the initial effect of cost-push inflation.
Question 4
Explain and use an AS/AD diagram to illustrate the long run effects of expected demand – pull inflation.
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