Inflationary Gap: At Capacity, The difference between Planned Expenditure and Agg. Output (rise in price not met with rise in Y) Causes of Inflation: Demand Pull ? initiated by MD? Cost Push/Supply-Side ? caused by ?Costs and ?Supply Stagflation- Causes both Y? P? - BAD NEWS Expectations: Of price increases cause companies to collectively pre-empt by increasing prices causing the real price to rise Monetary/Fiscal: Expansionary monetary/Fiscal policy at capacity will also push up AD causing inflation Lags: Recognition, Implementation -much longer for Fiscal Policies, Response - time it takes for the economy to adjust after implementation- much longer for Monetary Policies)
Macroeconomics Formula Sheet
Inflationary Gap: At Capacity, The difference between Planned Expenditure and Agg. Output (rise in price not met with rise in Y) Causes of Inflation: Demand Pull ? initiated by MD? Cost Push/Supply-Side ? caused by ?Costs and ?Supply Stagflation- Causes both Y? P? - BAD NEWS Expectations: Of price increases cause companies to collectively pre-empt by increasing prices causing the real price to rise Monetary/Fiscal: Expansionary monetary/Fiscal policy at capacity will also push up AD causing inflation Lags: Recognition, Implementation -much longer for Fiscal Policies, Response - time it takes for the economy to adjust after implementation- much longer for Monetary Policies)
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