Production costs potentially leading to cost inflation, but the demand side affects will always outweigh the supply side. Anything you would add?
As you move into Unit 4 I wouldn't express it this way any more. You should start using the channels of monetary policy, some of which are implied in your answer. Strong students will actually name them (and on a recent exam there was a specific question about the channels).
You can read about them here:
http://www.mrwood.com.au/unit4/adp/monetary/mapproach6.asp
Mr Wood
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