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10 Questions

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Demand Pull Inflation Control Policies

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Questions and Answers

Why can't Cost Push Inflation be controlled using demand-related policies?

Demand-related policies only affect supply-side sectors

Demand-related policies may decrease the price but also decrease the national income or output (correct)

Demand-related policies have no effect on inflation

Demand-related policies lead to an increase in national output

Which type of inflation can be controlled by using contractionary fiscal policy?

Cost Push Inflation

Demand Pull Inflation (correct)

Supply-Side Inflation

Stagflation

What is the main reason for Cost Push Inflation?

Increase in Money Supply

Increase in Government Expenditure

Increase in Wages, Profit Margin, and Price of Input (correct)

Increase in Aggregate Demand

What concept emerges when there is an increase in price and unemployment at the same time?

Stagflation Signup and view all the answers

Which policy can be used to control Stagflation or cost push inflation?

Supply-Side Economics Policy Signup and view all the answers

According to the principle of effective demand, what determines the level of output and employment in a country?

Aggregate demand function Signup and view all the answers

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 Signup and view all the answers

In pre-Keynesian terminology, what concept contradicts the principle of effective demand?

Supply creates its own demand Signup and view all the answers

What is the significance of the term 'effective demand' in Keynesian Economics?

Determines the level of output and employment Signup and view all the answers

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 Signup and view all the answers