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- inflation, unemployment, economic growth
* since its absolute - “always”, must disagree.
* can split inflation into 2 different types (cost push & demand pull)
1. Inflation will lead to economic growth
- good expectations as they expect prices to rise —> will want to consume more & invest more —> C & I rise —> AD rises —> economic growth
2. Cost-push inflation will not lead to economic growth
- when cost of production rises —> SRAS falls —> negative economic growth
3. demand pull inflation will not lead to economic growth WHEN its at the level of full employment (Using a condition to answer the question)
- if the AD curve rises at the level of full employment, only GPL rises while GDP doesn’t rise
^ hence u can also argue that it’ll lead to economic growth if near level of full employment (take note not to say before level of full employment because there will be no demand pull inflation)
4. Inflation will not lead to economic growth
- cost of living rises -> assuming income stays the same -> purchasing power falls -> C falls -> AD falls -> GDP falls