If Cost-Push Inflation Occurs and the Government Adopts a Hands-Off

question 113

Multiple Choice

If cost-push inflation occurs and the government adopts a hands-off policy approach, then, according to the simple extended AD-AS model, in the long run the economy will

• A) get back to where it started from.
• B) get stuck with high unemployment.
• C) experience an inflationary spiral.
• D) have a higher price level.

---

Definitions:

Erie Canal

A historic 363-mile waterway in New York that connects the Atlantic Ocean to the Great Lakes, greatly enhancing trade and transportation in the early 19th century.

Industrial Revolution

A period of major industrialization during the 18th and 19th centuries that transformed predominantly agrarian societies into industrialized and urban ones.

American Trade

Refers to the commerce and trade activities conducted by the United States with other countries, encompassing exports and imports of goods and services.

Supreme Court

The highest federal court in the United States, consisting of nine Justices and having ultimate appellate jurisdiction over all U.S. courts and the authority to interpret the Constitution.