Government and the macroeconomy - Inflation (3)

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1.

The government decides to increase government spending on infrastructure projects. Explain how this policy could lead to demand-pull inflation. Consider the potential impact on aggregate demand and aggregate supply.

2.

The government uses the CPI to monitor inflation and make economic policy decisions. Discuss how changes in the CPI can affect government policy. Give specific examples.

3.

The government uses various methods to control inflation. Explain three methods the government can use to control inflation, and discuss the potential advantages and disadvantages of each method.