MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 14, Problem 9PA
To determine
The different measures of
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Whether one regards inflation as a “good” thing or a “bad” thing depends very much on one’s economic situation. If you are a borrower, unexpected inflation is a ["", "", "", ""] thing—it reduces the value of money that you must repay. If you are a lender, it is a ["", ""] thing because it reduces the value of future payments you will receive.
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 bonds
Give two specific reasons why inflation in Canada is higher than normal.
Chapter 14 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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- In the short-run you know that firms and households expect inflation of 3.6% next year. There are no supply shocks and cyclical unemployment is 1.09%. Lambda is 0.5. With this information, what is the inflation rate today? Write your answer as a percentage, round at one (1) decimal, and do not write the percentage sign. Use a minus sign if needed.arrow_forwardExplain the effects of inflation on various groups of people in the society.arrow_forwardNaked Economics: Undressing the Dismal Science Book by Charles Wheelan Please refer to the chapter titled, "The Federal Reserve," in the Naked Economics book to answer this question. Which of the below statements IS NOT CORRECT about the term "inflation" or its effect, as Charles Wheelan explains the term in this chapter? 1) Inflation favors retired people with fixed incomes and increases the purchasing power of their income. 2) Inflation redistributes wealth arbitrarily, as unexpected bouts of inflation are good for debtors and bad for lenders. 3) Massive inflation (or, hyperinflation) distorts the economy, as workers rush to spend their cash before it becomes worthless. 4) The most instructive way to think about inflation is not that prices are going up, but rather that the purchasing power of the dollar is going down.arrow_forward
- Which type of inflation is usually most pronounced during the expansionary phase of the business cyclearrow_forwardInflation is defined as increases in the average prices in the economy. The February 2022 inflation rate is 7.9% which is the highest in the last 40 years. Have you noticed the price increases in your daily life? What goods are increased by the most? and by how much? What do you think are the causes of the recent inflation? How do you cope with the inflation?arrow_forwardWhich of the below statements IS NOT CORRECT about the term "inflation" or its effect, as Charles Wheelan explains the term in this chapter? Group of answer choices Massive inflation (or, hyperinflation) distorts the economy, as workers rush to spend their cash before it becomes worthless. The most instructive way to think about inflation is not that prices are going up, but rather that the purchasing power of the dollar is going down. Inflation redistributes wealth arbitrarily, as unexpected bouts of inflation are good for debtors and bad for lenders. Inflation favors retired people with fixed incomes and increases the purchasing power of their income.arrow_forward
- Macmillan Learning After graduating from college in 2010, Art Major's starting salary is $35757.00. Suppose Art Major has a cost of living adjustment (COLA) clause, or an escalator clause, in his labor contract so that he will be able to maintain this same level of purchasing power in real terms in 2011 and 2012. Using the information in the table, how much will Art Major earn in 2011 and 2012 if his salary keeps up with inflation? Round your answers to the nearest dollar. CPI 102.77 105.69 107.06 What is Art Major's salary in 2011? $ Year 2010 2011 2012 36784.62 Incorrect What is Art Major's salary in 2012? 37278.51arrow_forwardConsider the nature of unemployment and inflation and predict whether or not they should have some sort of relation with each other. Explain why you expect that relation to hold true.arrow_forwardWhich of the following groups would most likely be harmed by inflation? Group of answer choices spenders workers retirees none of the above Older people often reminisce about the “good old days” when prices were much lower. This is misplaced nostalgia primarily because in the “good old days” Group of answer choices prices were not really that low wages were much lower also When interest rates fall, investment expenditures by businesses Group of answer choices decrease increasearrow_forward
- We have talked about inflation. Consider the following question and evaluate: Do rising oil prices cause inflation?arrow_forwardthe article discusses the balance between inflationary pressures and other economic tensions. What are some of the factors that were leading to rises in inflation?arrow_forwardDarla takes out a home loan from a bank. The bank's goal is to make 4% real interest on the loan. If the bank's economists predict that inflation will be 3.5% over the period before the loan is repaid, the bank should charge a nominal interest rate of percent. (Enter your answer "as a percent, but without the percentage sign." In other words, if you think the bank should charge 99.9 percent interest, just put 99.9 in the blank.)arrow_forward
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