Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 10, Problem 9CQ
To determine
Identify the unexpected change in the price level that causes the expected inflation.
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Chapter 10 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: A union member with a COLA wage contract Someone with a large stash of cash in a safe deposit box A bank lending money at a fixed rate of interest A person who is not due to receive a pay raise for another 11 monthsarrow_forwardDemand-pull inflation can develop when...arrow_forwardIf your nominal income rose by 5.3 percent and the price level rose by 4.8 percent in some year, by what percentage would your real income (approximately) increase?Instruction: Round your answer to one decimal place. %If your nominal income rose by 2.8 percent and your real income rose by .9 percent in some year, what must have been the (approximate) rate of inflation?Instruction: Round your answers to one decimal place. %arrow_forward
- Suppose that inflation increases from Year #1 to Year#2 without growth. Which of the following graphs correctly shows this situation? (Note: Year #2 positions are shown with dark blue lines.) Price Level Price Level a Ps 0 1 LRAS QN Q₁ LRAS ON 0₁ A) Graph A B) Graph B C) Graph C D) Graph D SRAS SRAS UI SRAS, AD, (M-$800 billion; V - 3) MTD AD₂ (M-$820 billion; V = 3) SRAS, (c) MVT Real GDP AD₂ (M-$800 billion; V - 4) AD, (M-$800 billion; V - 3) Real GDP Price Level Price Level Qa 0 ON P₁ O -- 1 1 0₁ ON 2 -=-= LRAS 1 T LRAS 6 ở SRAS, SRAS₂ AD, (M-$800 billion; V-3) (b) AD₂ (M-$780 billion; V- 3) SRAS1 MIV SRAS2 (d) MV↓ Real GDP AD, (M-$800 billion; V-3) AD₂ (M-$900 billion; V=2) Real GDParrow_forwardBob loans his sister-in-law $1000 so she can make her rent. She must pay it back after one year. If Bob charges her 6 percent interest and wants to get a real return (real interest) of 3.5 percent, Bob must anticipate that inflation will be___________ percent over the next year. (Carefully follow all numeric instructions. Enter your answer "as a percent, but without the percentage sign." In other words, if you think Bob predicts 99.99 percent inflation, just enter 99.99 in the blank.)arrow_forwardSuppose gold (G) and silver (S) are substitutes for each other because both serve as hedges against inflation. Suppose also that the supplies of both are fixed in the short run and \{(:Q_{C}=300)\} and that the demands for gold and silver are given by the following equations: P_{G}=960-Q_{G}+0.50P_{S} and P_{S}=600-Q_{S}+0.50P_{G} What the the equilibrium prices of gold and silver? The equilibrium price of gold is S and the equilibrium price of silver is S Please explain and show work.arrow_forward
- Suppose that people expect inflation to equal 5 percent, but in fact, prices rise by 7 percent. Which of the following groups or individuals are hurt by this unexpectedly high inflation rate? Check all that apply. The government A union worker in the second year of a labor contract A homeowner with a fixed-rate mortgage A college that has invested some of its endowment in government bonds that are not indexed Treasury bondsarrow_forwardAssuming prices are sticky in the short run, a decrease in useful government spending will cause inflation to __________ in the short run and growth to ___________ in the short run. remain unchanged/decrease increase/increase decrease/increase decrease/decrease remain unchanged/remain unchangedarrow_forwardSuppose that people consume only three goods, as shown in this table: 2020 Price Quantity 2021 Price Quantity Tennis Balls Percentage Change $2 100 True $2 100 False Golf Balls Bottles of Gatorade $4 100 $6 100 Complete the following table by computing the percentage change in price for each of the three goods. $2 200 $3 200 Tennis Balls Golf Balls Bottles of Gatorade 0% 50% Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is 50 True or False: If you were to learn that a bottle of Gatorade increased in size from 2020 to 2021, that information would raise your estimation of the inflation rate. %arrow_forward
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