what is the difference between demand-side inflation and supply-side inflation?
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The first occurs when your costs of supplying that product increase, and you pass the increase along to the customer. This is known as cost-push inflation. The second, more common, cause is that demand for the product at the current price exceeds the available supply. This is demand-side inflation.
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Because inflation erodes the value of investment returns over time, investors may shift their money to markets with lower inflation rates. Unlike cost-push inflation, demand-pull inflation occurs when aggregate demand in an economy rises too quickly.
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The key difference between cost of living and inflation is that cost of living is the cost of maintaining a certain standard of living whereas inflation is the general increase in price levels in the economy.
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a low own price elasticity of demand and a low price elasticity of market supply. What is the difference between a price support and a price floor? A price support is below equilibrium; a price floor is above it.
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Inflation occurs when the prices of goods and services rise, while deflation occurs when those prices decrease. The balance between these two economic conditions, opposite sides of the same coin, is delicate and an economy can quickly swing from one condition to the other.
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In the short-run, inflation and unemployment are inversely related; as one quantity increases, the other decreases. In the long-run, there is no trade-off. In the 1960's, economists believed that the short-run Phillips curve was stable.
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a. There is no difference between the two items; they both refer to a movement along a given supply curve. ... An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' means at any given price supply has increased.
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There can be a conflict between economic growth and inflation. In periods of rapid economic growth, inflation is likely to rise. However, it is possible to have both low inflation and positive economic growth – so long as the growth is sustainable and productive capacity increases at a similar rate to AD.
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All else being equal, a larger money supply lowers market interest rates, making it less expensive for consumers to borrow. Conversely, smaller money supplies tend to raise market interest rates, making it pricier for consumers to take out a loan.
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Inflationary gap is when the aggregate demand exceeds the productive potential of the economy. ... Deflationary gap is the difference between potential output at full level of employment and the actual level of output of the economy.
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There is no difference between the two items; they both refer to a movement along a given supply curve. ... An 'increase in supply' means the supply curve has shifted to the right while an 'increase in quantity supplied' means at any given price supply has increased.
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The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases. ... Theoretical Phillips Curve: The Phillips curve shows the inverse trade-off between inflation and unemployment. As one increases, the other must decrease.
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Historically, inflation and unemployment have maintained an inverse relationship, as represented by the Phillips curve. Low levels of unemployment correspond with higher inflation, while high unemployment corresponds with lower inflation and even deflation.
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In general, when interest rates are low, the economy grows and inflation increases. Conversely, when interest rates are high, the economy slows and inflation decreases.
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The link between Money Supply and Inflation. ... Increasing the money supply faster than the growth in real output will cause inflation. The reason is that there is more money chasing the same number of goods. Therefore, the increase in monetary demand causes firms to put up prices.
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Cost-push inflation is the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production. ... Demand-pull inflation can be caused by an expanding economy, increased government spending, or overseas growth.
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['Demand shifts to the left. A decrease in demand shifts the demand curve to the left and reduces price and output.', 'Supply shifts to the right. An increase in supply shifts the supply curve to the right, which reduces price and increases output.', 'Supply shifts to the left.']