Differentiate Between "Demand-Pull" and "Cost-Push" Inflation Using the Aggregate Demand-Aggregate

question 20

Essay

Differentiate between "demand-pull" and "cost-push" inflation using the aggregate demand-aggregate supply model.

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Definitions:

Fixed Input

A resource used in production that cannot be changed in the short term, such as buildings and machinery.

Short Run

A time period in economics during which at least one input, such as plant size or capital, is fixed and cannot be changed.

Total Fixed Cost (TFC)

The sum of all costs required to produce any level of output that does not change as the level of production increases or decreases.

Total Costs (TC)

The total of variable and fixed expenses a business faces while creating goods or services.