0
Why would an expansionary gap lead to a change in inflation Why would a recessionary gap lead to a change in inflation?
Wiki User
∙ 13y ago
Assuming that the aggregate demand curve does not move, the only way for the gap to be closed is by a shift in aggregate supply. These gaps cause a change in inflation expectations, moving the AS curve left (exp) or right (rec) back to long term equilibrium and changing the inflation rate.
Wiki User
∙ 13y ago
Add your answer:
Earn +20 pts
What would people do in periods of high inflation?
550% loser
What is the free silver issue?
This was a Central America Policy issue in the late 19th century about using "free coinage" of silver instead of the gold standard. It was a response to inflation, but had it been done it would have resulted in a greater inflation.
What is the result when a government prints paper money without gold to back it up?
When the government prints paper money without the gold to back it up, the result is inflation.
If the US is so much in debt why can't we print more money and pay it off?
This would cause inflation the more money we put into circulation to cover debt the more inflated money would become. Inflation is where the value of our currency decreases more and more. For example, when people say "back in my day you could get a hot dog and coke for 5 cents" they aren't lying that's just what the value was back then, inflation causes the increase in cost.This was done in Germany after WWI were the Germans printed moneys to pay for the reparations debt with out the GDP to back there moneys ... Which lead to a depression and the rise of Hitler ...
Why did some people oppose the use of silver as money?
They argued that using silver as money would lead to inflation and undermine the economy. They proffered to trade.
Why is demand pull inflation considered good?
It would imply that there is no recessionary state present in the current economy. For demand pull inflation is essentially too much spending for too little goods. With "too much spending" Aggregate Demand would be at or above the full employment rate.
If there is a recessionary gap of 1000 billion and the mpc is 0.75 how much would the government spend to close the recessionary gap?
500 billion
Will inflation lead to change in demand?
Will inflation lead to change in demand? Inflation is defined as the rise of prices in goods and services in a society. Therefore inflation and demand are strongly depended on each other. Supposedly the inflation grows over a period of time, the demands would effect the different levels in society by a equivalent decrease and vice versa.
How would inflation be different if real income growth were higher Explain?
it will not change the rate
How does increasing money supply affect expansionary monetary policy?
Expansionary Monetary Policy is adopted by the monetary authorities to increase the money supply of an economy. If money supply is increasing, and central bank adopts an expansionary monetary policy, it would result in inflationary pressures.
Is the swelling of a life raft a physical or a chemical change?
The actual swelling of a life raft would be called inflation which is a physical change.
What would be an example of expansionary fiscal policy?
Lowering taxes and raising government spending.Social security measures taken by the govt. is an example of expansionary policy. Subsidies, Tax rate cuts etc are other examples...There is a few example of expansionary fiscal policy. Some of the examples are tax cuts, rebates and increased spending.
If policy makers are worried about inflation what would be a correct fiscal policy change?
A fiscal policy solution to inflation would be to either increase taxes or decrease government spending.increase the tax rate
If full employment in this economy is 130 million will there be an inflationary expenditure gap or a recessionary gap What will be the consequence of this gap By how much would aggregate expenditures?
A recessionary gap. Equilibrium GDP is $600 billion, while full employment GDP is $700 billion. Employment will be 20 million less than at full employment. Aggregate expenditures would have to increase by $20 billion (= $700 billion -$680 billion) at each level of GDP to eliminate the recessionary gap. The MPC is .8, so the multiplier is 5.
What effect would inflation have on a company's cost of capital?
What effect would inflation have on a company's cost of capital
How can an increase in nominal income and a decrease in real income occur simultaneously?
real income is the change with inflation taken into account, nominal income is purely the change of income therefore if inflation was to be 5% and nominal income increased by 2% there would be a real income decrease of 3%
Which type of monetary policies would the Federal Reserve most likely use when the economy is struggling?
Expansionary policies
