Question

1.) Do you think the inflation rate will decrease, increase, or stay the same over the next couple of years? Explain your reasoning.

2.) WHich of the following economic changes are consistent with cost-push inflation? Check all that apply

* rising economic output

* an increase in the price level

* falling economic output

Answer 1

a) In the next two year In the US the inflation will increase as the employment is on the rise and demand is increasing, that will increase the investment further and increase the demand in the market. That will increase the inflation in the market and shift in the demand curve to the right i.e. at a higher price and higher output.

b) Due to cost push inflation the price will increase and the output will fall. It is called stagflation.

the answer is "B" and "C".