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- Which of the following expectations will NOT increase spending? a. Employment b. Laying off c. Maturity of Investment d. Promotion"It is possible to have a situation where the nominal wage is rising and the price level is falling, while the real wage still decreases." The statement above is true, false, uncertain, or not enough Information? Please show your explanation.After experiencing the new equilibrium inflation rate and its effect on their real wage, workers realize that the equilibrium inflation rate has changed, and their real wage has changed. Suppose that they change their expected inflation rate and accept to lower the growth rate of nominal wage by the same amount as the change in the equilibrium inflation rate. What motivates the workers to accept this change in their expected inflation rate?
- There is a persistent fear that there will be a high level of deflation. Many economists warn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.25% nominal interest rate. He expected inflation to be 1.50%. Instead, inflation is −2.00% (deflation). Multiple Choice Question... Because the economy is experiencing deflation of −2.00%instead of inflation of 1.50%, Herb's real interest rate, compared to what he expected to pay, has A) decreased, so Herb feels poorer. B) increased, so Herb feels richer. C) decreased, so Herb feels richer. D) increased, so Herb feels poorer.true/false, explain There are an infinite number of combinations of real interest rates and inflation rates consistent with a nominal interest rate of zero.1.Select one fro the given options a.The sticky wage model of AS: I. explains the vertical AS in the short run. ii. assumes flexible prices and nominal wages. iii. assumes flexible prices and sticky real wages. iv. explains the short-run deviations of the actual output from the potential one b. Choose the correct statement: i. According to the Life-cycle hypothesis the consumption changes only with unexpected changes in income. ii. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that life expectancy is 40 years iii. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that a half of one's life expectancy is spent in retirement iv. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that consumption will increase by CZK 25, when wealth will increase by CZK 1,00
- Explain the impact of deflation when interest rates are at the zero lower bound. (Hint: your response will likely require referencing formula as well as charts)Define rational expectations and explain the two rational expectation theories of the business cycle?? Definition of rational expectation: ......... Rational expectations theories. ...... ......Which of the following are likely consequences of rising inflation? Check all that apply. Savers wanting to save less and borrowers wanting to borrow more Savers wanting to save more and borrowers wanting to borrow less A misallocation of resources A distorted price-signaling mechanism Suppose the real interest rate (IR) is 3.5% and the inflation rate is 3.5%, and then the nominal or market interest rate is_______ . Crystal considers investing in the green energy industry and compares the following two options: 1. One-year bonds issued by Air Wizard, a producer of wind turbines based in the United States, that pay a nominal interest rate of 7% 2. One-year bonds issued by Sun Waters, a producer of solar water heaters based in Australia, that pay a nominal interest rate of 9.8% A thorough study has shown that the economic situation and prospects in the United States and Australia are very similar. Nevertheless, Crystal decides to…
- Inflation in the Philippines this year has surged to 4.9% in 2022, exceeding the inflationtarget band set by the Bangko Sentral ng Pilipinas. In response, the BSP might raise theirkey real interest rate soon, which will in turn affect loaning and lending rates in thecountry. In response to these conditions, firms and investors are growing anxious and assuch, are planning on pulling back on their investments. Given all the information above, illustrate and explain the effects of the decrease ininvestment on the economy. Make sure to cover the following: shifts (if any) in theaggregate expenditure curve, the change in equilibrium output (i.e. identify and comparethe old and new level of equilibrium output in the graph, and the multiplier effect.assume instead that the nominal interest rate is 4 percent and the expected rate of inflation is minus 1 percent. Calculate the real rate of interest.According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.