Part one of term paper
? In today's economy, there are devices present called automatic stabilizers. Automatic stabilizers, are mechanisms which aid in the correction of an economic problem without the interference of anyone or anything. They are perhaps most useful to combat demand - pull inflation. Demand - pull inflation, is when prices rise because the econo ...

Part two of term paper
... prosperous, such as in the situation with demand-pull inflation, the citizens are taxed more, therefore decreasing the marginal propensity to consume, and decreasing consumption. The marginal propensity to consume is the fraction of any change in disposable income spent for consumer goods. If this decreases, demand will not be as high above, or even above where the supply is, therefore reducing the demand - pull inflation. Another way to stabilize demand - pull inflation is to reduce government ...