2. AD AS AD 1 Price Level PL e Ye Real GDP PL 1 Y1Y1 Demand Pull Inflation Real GDP increases Price level increases

3. Demand Pull Inflation Increase in Consumption Rising household incomes due to a decrease in direct tax Decrease in interest rates Increase in inflationary expectations Increase in government spending or decrease in tax Government runs a budget deficit - (G>T) Increase in Net Exports Increase in consumer confidence Depreciating $NZ results in increased exports and a decrease in imports Increase in demand for NZ products abroad. Increase in Investment Increase in business confidence Decrease in interest rates

4. Price Level Real GDP AD AS PL e Ye AS 1 PL 1 Y1Y1 Cost Push Inflation Real GDP decreases Price level increases

5. Cost Push Inflation Increase in nominal wages Decrease in productivity Increase in cost of imported raw materials due to a depreciation in the $NZ. Increase in indirect taxes such as GST, import tariffs and excise taxes on petrol, cigarettes and alcohol Increase in price of raw materials due to increase in world prices, e.g. Increase in the price of oil Supply shocks, e.g. earthquakes, floods, drought, wars. These cause AS to shift left