Q1. Drag and Drop. (20 points) Instructions. Fill in the blanks by dragging and dropping the missing words in the blanks. There are more word options available than blanks, so some might not be used. You can use one item only once. Click the submit button when all blanks are filled in. Inflation measures the changes in the level of in the economy. Demand-pull inflation is caused by a shift in the aggregate demand curve, while cost-push inflation is caused by a shift of the aggregate supply curve. When the price level is increasing by an extremely high rate, the economy is said to be experiencing Stagflation occurs when the economy is experiencing high inflation, high unemployment, and low at the same time. To combat inflation, the government can use contractionary monetary policy which will also lead to interest rates. Note, however, that there is a short-run tradeoff between inflation and as illustrated by the Philips Curve. Inflation is stable when the unemployment rate is equal to the rate of unemployment. If the CPI in year one is 112 and in year 2 it is 118, we can say that consumer prices rose by about During the inflationary period if a worker received a 3% pay raise when the inflation rate was 7%, it means that the worker's real wage fell by Similarly for the economy, if the price level rose by 4% and the nominal output rose by 9%, then the economy's real output has risen by If the price of housing (which accounts for 40% of total expenditures in the CPI basket) also rose by 4% while the prices of all the other goods in the CPI basket remained constant, then the CPI would have risen by MyASUS