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It Is Frequently Difficult to Separate Supply-Side from Demand-Side Inflation

Question 51

Multiple Choice

It is frequently difficult to separate supply-side from demand-side inflation because


A) they are ultimately caused by the same forces.
B) resource price increases may be responsible for the initial price level increase, but further price level increases result from the Fed's efforts to reduce the resulting unemployment.
C) in cases where there is too much aggregate spending, the economy has excess capacity and therefore has a horizontal aggregate supply curve.
D) both kinds of inflation lead to a rapidly increasing total real output.
E) the resulting price level effects of each offset one another.

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