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InflationInflation
Inflation in practiceInflation in practiceInflation in practiceInflation in practice
InflationInflation
Inflation rates in selected industrial countriesInflation rates in selected industrial countries
UK
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
Inflation (% increase in retail prices)
UK
EU15
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
Inflation (% increase in retail prices)
Inflation rates in selected industrial countriesInflation rates in selected industrial countries
UK
EU15
USA
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
Inflation (% increase in retail prices)
Inflation rates in selected industrial countriesInflation rates in selected industrial countries
UK
EU15 Japan
USA
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
Inflation (% increase in retail prices)
Inflation rates in selected industrial countriesInflation rates in selected industrial countries
UK
EU15 Japan
USA
OECD
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
1965 1970 1975 1980 1985 1990 1995 2000
Inflation (% increase in retail prices)
Inflation rates in selected industrial countriesInflation rates in selected industrial countries
Aggregate demand,Aggregate demand,
aggregate supplyaggregate supply
and the price leveland the price level
Aggregate demand,Aggregate demand,
aggregate supplyaggregate supply
and the price leveland the price level
InflationInflation
O
Pri
ce le
vel
National output
Aggregate demandAggregate demand
O
Pri
ce le
vel
National output
AD
Aggregate demandAggregate demand
O
Pri
ce le
vel
National output
Aggregate demandAggregate demand
O
Pri
ce le
vel
National output
AS
Aggregate supplyAggregate supply
O
Pri
ce le
vel
National output
AS
AD
Aggregate demand and aggregate supplyAggregate demand and aggregate supply
O
Pri
ce le
vel
National output
AS
AD
Pe
Aggregate demand and aggregate supplyAggregate demand and aggregate supply
O
Pri
ce le
vel
National output
AS
AD
Pe
P2
ab
Aggregate demand and aggregate supplyAggregate demand and aggregate supply
Demand-pull andDemand-pull and
cost-push inflationcost-push inflation
Demand-pull andDemand-pull and
cost-push inflationcost-push inflation
InflationInflation
O
Pri
ce le
vel
National output
AS
AD1
P1
Q1
Demand-pull inflationDemand-pull inflation
O
Pri
ce le
vel
National output
AS
AD1
P1
Q1
AD2
Demand-pull inflationDemand-pull inflation
O
Pri
ce le
vel
National output
AS
AD1
P1
Q1
AD2
P2
Q2
Demand-pull inflationDemand-pull inflation
Cost-push inflationCost-push inflation
O
Pri
ce le
vel
National output
AS1
AD
P1
Q1
O
Pri
ce le
vel
National output
AS1
AD
P1
Q1
AS2
Cost-push inflationCost-push inflation
O
Pri
ce le
vel
National output
AS1
AD
P1
Q1
AS2
P2
Q2
Cost-push inflationCost-push inflation
The interaction ofThe interaction of
demand-pull anddemand-pull and
cost-push inflationcost-push inflation
The interaction ofThe interaction of
demand-pull anddemand-pull and
cost-push inflationcost-push inflation
InflationInflation
The interaction of demand-pull and cost-push inflationThe interaction of demand-pull and cost-push inflation
O
Pri
ce le
vel
National output
AS1
AD1
P1
O
Pri
ce le
vel
National output
AS1
AD1
P1
AS2
AD2
P2
The interaction of demand-pull and cost-push inflationThe interaction of demand-pull and cost-push inflation
O
Pri
ce le
vel
National output
AS1
AD1
P1
AD2
P2
AS3
AD3
P3
AS2
The interaction of demand-pull and cost-push inflationThe interaction of demand-pull and cost-push inflation
The interaction of demand-pullThe interaction of demand-pulland cost-push inflation:and cost-push inflation:
(a) an initial increase in(a) an initial increase inaggregate demandaggregate demand
The interaction of demand-pullThe interaction of demand-pulland cost-push inflation:and cost-push inflation:
(a) an initial increase in(a) an initial increase inaggregate demandaggregate demand
InflationInflation
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS short run
AD
P0a
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
AD2
P2 c
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
AD2
c
Subsequentsupply response
AS1
P2
P3d
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
AD2
c
Subsequentdemand response
AS1
d
P2
P3
AD3
P4
e
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
AD2
c
AS1
d
P2
P3
AD3
P4
e
Subsequentsupply response
AS2
fP5
Initial demand-pull inflationInitial demand-pull inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1
a
b
AD2
c
AS1
d
P2
P3
AD3
P4
e
AD4
Subsequentdemand response
AS2
fP5
gP6
Initial demand-pull inflationInitial demand-pull inflation
The interaction of demand-pullThe interaction of demand-pulland cost-push inflation:and cost-push inflation:
(b) an initial reduction in(b) an initial reduction inaggregate supply / increaseaggregate supply / increase
in aggregate costsin aggregate costs
The interaction of demand-pullThe interaction of demand-pulland cost-push inflation:and cost-push inflation:
(b) an initial reduction in(b) an initial reduction inaggregate supply / increaseaggregate supply / increase
in aggregate costsin aggregate costs
InflationInflation
Initial cost-push inflationInitial cost-push inflation
O
National output
Pri
ce le
vel
AS
AD
P0
a
O
National output
Pri
ce le
vel
AS
AD
P0
P1 ab
AS1
Initial cost-push inflationInitial cost-push inflation
O
National output
Pri
ce le
vel
AS
AD
P0
P1 ab
c
AS1
P2
AS2
Initial cost-push inflationInitial cost-push inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1 ab
c
AS1
d
P2
P3
Subsequentdemand response
AS2
Initial cost-push inflationInitial cost-push inflation
O
National output
Pri
ce le
vel
AS
AD
P0
AD1
P1 ab
c
AS1
d
P2
P3
P4e
Subsequentsupply response
AS2
AS3
Initial cost-push inflationInitial cost-push inflation
