The two main types of inflation are 'demand pull inflation' and 'cost push inflation'.
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What is Demand Pull Inflation? (P182)
This is where 'AD' exceeds 'AS' leading to increased prices. If 'AD' shifted right when in a slump then it wouldn't be too bad, however if it moved in a boom it may result in high inflation as the equilibrium moves up the 'LRAS' (full employment) .
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.What is Cost Push Inflation? (P183)
This is where increased costs in production push prices up. This could be through increased wage demands, or increases in fuel prices. The result is that the 'SRAS' curve shifts left, up the 'AD', raising prices.
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What is the boom/bust policy? (P186)
This is where the government tried to achieve full employment by expanding the economy, then when inflation levels grew too high it changed policy to lower this. Then when unemployment got too high again, it switched back, and so on...
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What is cyclical unemployment? (P187)
This is where there is a lack of 'AD' due to the position in the economic cycle (e.g. in a recession).
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What is demand deficient unemployment? (P187)
This is where there is a insufficient 'AD' to employ all of the labour in the economy.
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What is frictional unemployment? (P187)
This occurs when people are moving between jobs, and are exploring what the market has to offer.
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What is voluntary unemployment? (P187)
This is where workers aren't prepared to take a job at the current wage levels.
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What is structural unemployment? (P187)
This occurs when the demand and supply pattern in the economy changes. It is associated with changes in the structure of the economy (e.g. mines to gas plants). It is more long-term than frictional unemployment, and requires considerable retraining.
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Card 2
Front
What is Demand Pull Inflation? (P182)
Back
This is where 'AD' exceeds 'AS' leading to increased prices. If 'AD' shifted right when in a slump then it wouldn't be too bad, however if it moved in a boom it may result in high inflation as the equilibrium moves up the 'LRAS' (full employment) .
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