problems of inflation and unemployment
Inflation Inflation is an increase in the overall price level. Keeping inflation low has long been a goal of government policy. Types of inflation 1. Demand-Pull Inflation Inflation initiated by an increase in aggregate demand is called demand-pull inflation. In both figure 1 and figure 2, the inflation begins with a shift of the aggregate demand schedule from ADo to AD1, which causes the price level to increase from Po to P1. ... Cost-Push Inflation Inflation can also be caused by an increase in costs, referred to as cost-push inflation. ... Stagflation occurs when output is falling at the same time prices are rising-in other words, when the economy is experiencing both a contraction and inflation simultaneously. ... Causes of Inflation 1. Inflation is an increase in the overall price level. A sustained inflation occurs when the overall price level continues to rise over some fairly long period of time. ... Demand-pull inflation is inflation initiated by an increase in aggregate demand. Cost-push inflation is inflation initiated by an increase in costs. An increase in costs may also lead to stagflation—the situation in which the economy is experiencing both a contraction and inflation simultaneously. ... Inflation can become “built into the system” as a result of expectations.