What Is the Crucial Difference Between Inflation Generated on the Demand

question 38

Multiple Choice

What is the crucial difference between inflation generated on the demand side versus inflation generated on the supply side?

• A)Demand-side inflation is short-lived, while supply-side inflation lasts for a long time.
• B)Demand-side inflation leads to budget surpluses, while supply-side inflation contributes to budget deficits.
• C)Supply-side inflation is subject to control of policy makers, while demand-side inflation is beyond their reach.
• D)Demand-side inflation is normally accompanied by rising real GDP, while supply-side inflation may be accompanied by falling real GDP.

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Definitions:

Minimum Wage

The lowest legal salary that employers can pay workers, intended to protect workers from unduly low pay.

Positive Economic Statement

An objective statement based on facts and evidence that can be tested and validated, concerning how the economy works.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Production Possibility Frontier

A graphical representation that shows the maximum quantity of two goods or services that a society can produce given fixed resources and technology, assuming all resources are fully employed.