If Demand-Pull Inflation Occurs When the Economy Is Already at Potential

question 10

Multiple Choice

If demand-pull inflation occurs when the economy is already at potential GDP then, following the initial increase in aggregate demand, the

• A) potential GDP line shifts leftward.
• B) AS curve shifts leftward.
• C) AS curve shifts rightward.
• D) potential GDP line shifts rightward.
• E) None of the above is correct because demand-pull inflation shifts only the aggregate demand curve.

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Definitions:

DuPont Cellophane Case

The antitrust case brought against DuPont in which the U.S. Supreme Court ruled (in 1956) that while DuPont had a monopoly in the narrowly defined market for cellophane, it did not monopolize the more broadly defined market for flexible packaging materials. It was thus not guilty of violating the Sherman Act.

Microsoft Case

A 2002 antitrust case in which Microsoft was found guilty of violating the Sherman Act by engaging in a series of unlawful activities designed to maintain its monopoly in operating systems for personal computers; as a remedy the company was prohibited from engaging in a set of specific anticompetitive business practices.

DuPont Cellophane Case

A landmark antitrust case in which DuPont was accused of monopolistic practices in the cellophane market, highlighting issues of market dominance and competition.

Relevant Market

A market segment within which a particular product is sold, characterized by its competitiveness and substitutability.