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Business
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| Number of pages / Number of words: |
6 / 1469 |
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2005) The higher the inflation rate is the quicker money is losing value and the more people have to pay to purchase the same products than before.
There are two main processes of inflation: demand-pull inflation and cost-push inflation. (Parkin et al, 2005. pp 655 656 657)
As figure 5 illustrated, Demand-pull inflation begins with the rightward shift of demand curve from AD0 to AD1...
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The price level increases and real GDP goes above potential GDP that lead to labour shortage. Then money wage rate is increased to shift supply curve from SAS0 to SAS1 and thereby bring the intercept point back on long-term supply curve while lifting the price level again.
The cost-push inflation process is similar to demand-pull inflation...
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