Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 35, Problem 4CQQ
To determine
The exchange rate between Paris and New York.
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If the economy is in long-term equilibrium and cost of energy for production increases, which of the following is likely to occur?
Select one:
a. It will lead to demand-pulled inflation and create an expansionary gap.
b. It will lead to demand-puled inflation and create a contractionary gap.
c. It will lead to cost-pushed inflation and create an expansionary gap.
d. It will lead to cost-pushed inflation and create a contractionary gap.
e. It will create hyperinflation in the economy, but will not create an economic gap.
The Phillips curve is
A.
a positive relationship between price stability and constant, small-increment changes in the fiscal policy on the part of the Fed.
B.
a positive relationship in the long run between the rate of inflation and the rate of unemployment.
C.
a negative relationship between the inflation rate and the unemployment rate, at least in the short run.
D.
a positive relationship between the unemployment rate and the real Gross Domestic Product (GDP) level.
Explain inflation. Is zero inflation good target?
Chapter 35 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Does inflation impose costs on the economy? Explain the problems with anticipated inflation and unanticipated inflation.arrow_forwardExplain one harm associated with unexpected inflation that is not associated with expected inflation. Then explain one harm associated with both expected and unexpected inflation.arrow_forwardOld MathJax webview Assume the public have rational expectations. According to the model, which policy is better: A monetary authority bound by rules or discretion? Assume the public have rational expectations. According to the model, which policy is better: a monetary authority bound by rules or discretion? For my equilibrium rate of inflation my answer was 0. For my equilibrium rate of output I got 2.5.arrow_forward
- Analysis of the Australian experience in reducing the inflation rate in the late 1980s suggests which of the following? Select one: a. Inflation can be reduced without a recession. b. Credibility plays no role in the macroeconomic effects of a disinflation policy. c. The sacrifice ratio showed decreasing gains over time. d. All of the above. e. None of the above.arrow_forward1) Whether you gain or lose during a period of inflation depends on: a) how the price increases affect government purchases of goods. b) whether the economy is expanding or contracting. c) whether you save or not. d) whether your income rises faster or slower than prices of the things you buy. 2) A real wage that does not keep pace with inflation implies: a) a decrease in purchasing power. b) a decrease in nominal wages. c) a decrease in nominal wages after inflation. d) an increase in the inflation adjusted real wage.arrow_forwardSuppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information? Select one: a. Workers will revise upwards price expectations. b. The inflation level will be higher next period than this period. c. The unemployment rate is less than the natural unemployment rate. d. The inflation level is less than the expected inflation level. e. None of the above.arrow_forward
- Explain what we can understand by expected inflation, inflation due to an increase in aggregate demand or inflation due to a decrease in aggregate supply.arrow_forwardThe rational expectations theory assumes that a. market participants formulate their expectations solely on the basis of past information b. market participants formulate their expectations on the basis of past, present, and projected future information. C. market participants lack rational economic behavior. market participants have perfect foresight. d. e. market participants are slow to learn of new policies.arrow_forwardExplain the pros and cons of inflation.arrow_forward
- If inflation is at target, phi = phi* , then actual output must coincide with potential output, Y=Y*. a. True b. Falsearrow_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 will most likely cause a change in the natural rate of unemployment? Select one: a. expansionary fiscal policy b. contractionary monetary policy c. contractionary monetary policy d. none of the other alternatives is correct e. expansionary monetary policy.arrow_forward
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