Business Fluctuations: Work It Out 3 of 3From the equation of exchange, MV = PY, we know that spending growth (M+7) equals inflation + Real growth. Recallfrom the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS curve (reading offthe vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAScurve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 4%, what will requal inthe long run? What will Er equal?A=Ex=What can you say about inflation (e) and expected inflation (Ex) in the long run?O Inflation can equal expected inflation in the long run, or it can be less than expected inflation in the long run.Inflation and expected inflation are equal in the long run.Inflation can equal expected inflation in the long run, or it can exceed expected inflation in the long run.O Inflation and expected inflation are not necessarily equal in the long run.

The measure that depicts general rise in prices of goods and services during a given time span in an…

From the equation of exchange, MV PY, we know that spending growth (M+7) equals inflation + Real growth. Recall from the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS curve (reading off the vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAS curve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 4%, what will equal in the long run? What will Er equal? Au En w What can you say about inflation () and expected inflation (Ex) in the long run? Inflation can equal expected inflation in the long run, or it can be less than expected inflation in the long run. Inflation and expected inflation are equal in the long run. Inflation can equal expected inflation in the long run, or it can exceed expected inflation in the long run. O Inflation and expected inflation are not necessarily equal in the long run.

From the equation of exchange, MV PY, we know that spending growth (M+7) equals inflation + Real growth. Recall from the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS curve (reading off the vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAS curve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 4%, what will equal in the long run? What will Er equal? Au En w What can you say about inflation () and expected inflation (Ex) in the long run? Inflation can equal expected inflation in the long run, or it can be less than expected inflation in the long run. Inflation and expected inflation are equal in the long run. Inflation can equal expected inflation in the long run, or it can exceed expected inflation in the long run. O Inflation and expected inflation are not necessarily equal in the long run.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Question

Business Fluctuations: Work It Out 3 of 3
From the equation of exchange, MV = PY, we know that spending growth (M+7) equals inflation + Real growth. Recall
from the chapter that in the long run (1) the inflation rate is found where the AD curve intersects the LRAS curve (reading off
the vertical axis) and (2) the expected inflation rate is found where the short-run aggregate supply curve intersects the LRAS
curve. With these things in mind, assume that the Solow growth rate is 3%. If spending growth equals 4%, what will requal in
the long run? What will Er equal?
A=
Ex=
What can you say about inflation (e) and expected inflation (Ex) in the long run?
O Inflation can equal expected inflation in the long run, or it can be less than expected inflation in the long run.
Inflation and expected inflation are equal in the long run.
Inflation can equal expected inflation in the long run, or it can exceed expected inflation in the long run.
O Inflation and expected inflation are not necessarily equal in the long run.

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