(SOLUTION) ECON312N Week 6 Assignment: Essay – Key Types of Inflation and the Social Implications

Resources
Read/review the following resources for this activity:

  • Textbook: Chapter 22, 24
  • Lesson
  • Minimum of 2 scholarly sources

Instructions
For this assignment, address all of the following parts:

  • Part A. Describe a hypothetical situation where either demand-pull or cost-push inflation occurs, addressing how the situation affects either the AD or AS curve, as well as the implications for prices and the overall effect on the economy. (Think about the circular flow model to help answer this question). You may include a graph to help illustrate your point.
  • Part B. Pick one of the populations listed and describe how inflation impacts this population in your example. Are their lives improved, about the same, or worse off? Describe why.
    • Unemployed
    • Retired
    • Homeowners (mortgage holders and/or people who have paid off their homes)
    • Young families
    • Working poor
    • The rich
  • Part C. What action can society (the government) take to minimize the negative impact on those most affected by the inflationary event? What trade-offs does society have to make? Make sure that your proposal has a reasonable chance of being passed by the country’s elected officials. Please use research to support your response.

Writing Requirements (APA format)

  • Length: 3-5 pages (not including title page, references page, or graphs)
  • 1-inch margins
  • Double spaced
  • 12-point Times New Roman font
  • Title page
  • References page (minimum of 2 sources)

SOLUTION

Key Types of Inflation and the Social Implications

PART 1

According to Schwarzer (2018), there are two kinds of inflation that happen according to the price of inputs or the demand side in the economy. In this vein, the demand side aspects lead to the development of demand-pull inflation whereas cost-push inflation arises from the supply side factors. The cost-push inflation happens when the general demand remains constant but there is evidence of a decline in the general supply because of external factors that result in an increase in the levels of price (Greenlaw & Shapiro, 2019).

It is worth noting that demand-pull inflation takes place when the overall demand is greater than the overall supply in a particular economy. In addition, when the aggregate demand for output is more than what a particular economy can offer, sectors such as businesses, households, foreign buyers, and the government tend to compete with the aim of buying a limited quantity of services and products in the market. In this regard, the buyers cause prices to increase resulting in an inflation rise (Schwarzer, 2018).

Demand-pull inflation impacts both the aggregate demand and aggregate supply curve as shown in figure 1 below. In this case, since the demand is greater than the aggregate supply, this means that there are more buyers resulting in the aggregate demand to hike and move to the right (Schwarzer, 2018). As such, this has negative impacts on the economy since it results in the rise of the cost of living, interest rates, as well as the cost of investing in businesses. Please click the purchase button to access the entire copy at $10