10 Questions
Why can't Cost Push Inflation be controlled using demand-related policies?
Demand-related policies may decrease the price but also decrease the national income or output
Which type of inflation can be controlled by using contractionary fiscal policy?
Demand Pull Inflation
What is the main reason for Cost Push Inflation?
Increase in Wages, Profit Margin, and Price of Input
What concept emerges when there is an increase in price and unemployment at the same time?
Stagflation
Which policy can be used to control Stagflation or cost push inflation?
Supply-Side Economics Policy
According to the principle of effective demand, what determines the level of output and employment in a country?
Aggregate demand function
What does the principle of effective demand suggest about under-employment and under-capacity utilization?
They can be consistent with the point of effective demand
In pre-Keynesian terminology, what concept contradicts the principle of effective demand?
Supply creates its own demand
What is the significance of the term 'effective demand' in Keynesian Economics?
Determines the level of output and employment
In John Maynard Keynes's book The General Theory of Employment, Interest and Money, what does the concept of effective demand refer to?
Point of intersection of aggregate functions
Learn about the demand pull inflation and the policies that can be used to control it. This quiz covers contractionary fiscal and monetary policies and how they affect aggregate demand and prices.
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