!) Consider the two sequences of events resulting from cost-push and demand-pull

Question

!) Consider the two sequences of events resulting from cost-push and demand-pull inflations. Assume that initially the economy is producing at its potential output.

I. COST-PUSH INFLATION: An unexpected and sharp rise in oil prices shifts the aggregate supply curve to the left, which lowers output and raises inflation.

II. DEMAND-PULL INFLATION: An unexpected and sharp rise in consumer confidence shifts the aggregate demand curve to the right, which raises output and raises inflation.

Which of these statements is accurate?


A. Statement I only

B. Both

C. Statement II only

D. Neither

Explanation / Answer

C. Statement II only

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