Energy costs push up US inflation

This article talks about the raising energy costs is increasing the US' inflation rate. When the costs of production in an economy goes up, the aggregate supply curve shifts in, since resource costs is a determinant of supply. When the aggregate supply curve shift in, with the aggregate demand curve staying the same, GDP would decrease and price level would increase. Since energy is essential in the production of almost all goods and services, it has a significant impact on the aggregate supply, therefore the inflation rate.

Unit 3.3, Chapter 12 #7

7.
The full-employment budget measures the country's deficit or surplus if the economy reached the full-employment level of GDP with current Fiscal Policy policies. It is used to determine whether a government is engaging in expansionary or contractionary policy. A deflect or surplus in the actual budget when the full employment budget is balanced is a result of the economy not running at full employment.
If full employment was at GDP3, then there would be a full employment budget surplus. Even though the actual budget has no deficit at GDP2, the fiscal policy is contractionary. The government should cut taxes or increase spendings. The g line should be raised or the T line should be lowered so they intersect at GDP3.

Unit 3.3, Chapter 12 Key Questions #2, 3

2.
Multiplier
= 1/ MPS
= 5
government spending = $5 billion

.8 x Tax Cut = 5 Billion
Tax Cut = 6.25 Billion

1.25 billion is saved, not spent.

3.
Increase taxes, decrease government spending, or both. Aggregate demand shifts in, therefore inflation goes down.

Someone that thinks the public sector is too large would favor less government spending, someone that wants to preserve the size would raise taxes

Unit 3.3, Chapter 11, the Last Word

1. Weigh the two arguments regarding unemployment in Europe. Is unemployment high because of high because of high natural rates of unemployment or because of deficient aggregated demand?

The reason for Europe's high unemployment rate probably lies between the two arguments. It is probably true that the natural rate of unemployment of Europe, especially Western Europe, is among the highest in the world. This is because of their very generous social benefits and minimum wage, which gives employers very little incentive to employ, and people little incentive to look for jobs. Therefore, 7-11% unemployment could possibly already be full employment for Europe. The second argument could also hold partly true, high interest rates and other government monetary policies could have kept aggregate demand relatively low. These two factors combined gave Europe high unemployment rates.