Inflation is a sustained rise in the average price level

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Inflation is a sustained rise in the average price level. An increase in aggregate demand can cause demand-pull inflation. A decrease in aggregate supply can cause cost-push inflation. Prior to World War II, both inflation and deflation were common, but since then the price level has increased virtually every year.

Why do you think that we have had such a consistent increase since WWII? Perhaps because the dollar is no longer pegged to gold. What role do you think the Fed has played in this?

Reference no: EM13743813

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