Why is deflation or disinflation an economic problem? O a. All of the answers are correct Ob. It discourages firms from producing output It affects the value of wealth that people hold O d. It affects income distribution, such as retired workers

Why is deflation or disinflation an economic problem? O a. All of the answers are correct Ob. It discourages firms from producing output It affects the value of wealth that people hold O d. It affects income distribution, such as retired workers

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

See similar textbooks

Related questions

Q: a) Derive the goods market demand curve in terms of the output (Y) and the exogenousvariables:c0,c1,...

A: Consider a model of goods market that is characterized by the following equations:- Aggregate deman...

Q: A farmer grows a bushel of wheat and sells it to a Miller for $20.00. The Miller turns the wheat int...

A: (a). GDP is the monetary value of those goods and services that are consumed by the final consumer, ...

Q: Exercise 2. Consider the mixed extension of the 2-person game defined by the payoff- matrices 5 1 A ...

A: Introduction Nash equilibrium is a part of game theory. It means that if there are two players in th...

Q: If the economy were encountering a severe recession, such as the Great Recession of 2007-2009 or the...

A: If the economy were encountering a severe recession, such as the Great Recession of 2007-2009 or the...

Q: Givens: The demand function for spaghetti is given by Qp = 21.6 x (1)0.685 x (Pspaghetti) -0.796 x (...

A: Equilibrium refers to the point of intersecting the demand and supply curve. It means the demand cur...

Q: If steak is a normal good, when incomes rise, the equilibrium price will _____, and the equilibrium ...

A: A normal good is that good whose demand increases when there is increase in the income of the consum...

Q: How many years will it take for an investment to double if the interest rate is 5%? a 33 b 12 ...

A: To find the number of years taken to double an amount, compound interest method can be used.

Q: Which of the following statements is FALSE? a.) Economists seek to apply the scientific method to so...

A: Scientific models do not attempt to explain every circumstance or every aspect because they are repr...

Q: 3. A perfectly competitive individual firm operates in a constant cost industry and produces a level...

A: Answer: (c). ATC=TCqATC=12×q2+5,000qATC=12q+5,000qATC=q2+5,000q Graphical presentation of ATC and MC...

Q: Distinguish the difference between nominal GDP and real GDP

A: GDP (gross domestic product) is the total value of goods & services manufactured in an economy d...

Q: Which of the following will affect our debt-to-GDP ratio? O a. Government expenditures O b. GDP grow...

A: Debt to GDP ratio is the ratio between the total debt of a country and its GDP. The lesser the ratio...

Q: Micropack producers would like to seek the advice of your Market Research company to advise and give...

A: Given information Demand function X= 35000-50P Ongoing cost=2000 that is fixed expense. Variable cos...

Q: 11) Stanley consumes only white and red wines and his utility function can be described by U(R,W) = ...

A: Utility is maximized when the slope of utility function, given by marginal rate of substitution is e...

Q: 5. How can the high rate of return available in modern financial markets discourage businesses from ...

A: Introduction The hazard-go back tradeoff is a buying and selling law that combines extreme risk with...

Q: In regards to minimum wage, should there be a national standard or should minimum wage be regulated ...

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and scarcit...

Q: How might your personal inflation rate differ from the average inflation rate as measured by the Con...

A: Food, clothing, housing, recreation, transportation, consumer staples, and other everyday or common ...

Q: When you take your first job, you decide to start saving right away for your retirement. You put P 5...

A: Given, monthly payment= P 5000 Interest rate= 8% Time period= 35 years

Q: he first costs of an equipment is P 65,000 and a salvage value of P 3,000 at the end of its 6 – year...

A: Let's Assume we buy equipment in the Year 2001.

Q: Which of the following statements is FALSE? high rates of unemployment often have a way of perpetuat...

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and scarcit...

Q: The Lerner index at the equilibrium of the linear Cournot symmetric model is equal а-с to L (n) = wh...

A: Equilibrium price refers to the price under which the supply is equal to the demand in a perfectly c...

Q: Consider a Hotelling model with two firms. Firm 0 being at point lo = 0 and firm 1 being at point l1...

A: According to question , Two firm are located at points (l1 & l2 ) such that (l1 = 0 ) & (l2...

Q: For the cash flow diagram sbown below, the value of x that will make the future worth in year 8 equa...

A: Future value of given cash flow is $147,458 i=10% n=8 years

Q: He described economics as a science of material welfare

A: To find : Who describes economics as science of material welfare

Q: Imagine that a state government is considering the construction of a new state office building to co...

A: Marginal benefits are the greatest sum a customer will pay for an extra decent or administration. Th...

Q: Briefly explain and graphically illustrate the property of diminishing margincal rate of substitutio...

A: The willingness of a consumer to substitute one good for another as long as the new good is equally ...

Q: Imagine that you lease an apartment for $900 a month. The market price for that apartment has increa...

A: Equilibrium Price Equilibrium price refers to a price level at which market demand is equal to the m...

Q: Question 4 Suppose there is a decrease in supply in a market where the supply curve slopes upwards a...

A: 4. When there is decrease in quantity supplied and the supply curve slopes upward with respect to pr...

Q: Calculate the missing information in the table Year Real GDP Nominal GDP GDP Deflator Prices of Nu...

A: GDP deflator = (Nominal GDP / Real GDP)*100 => Real GDP = (Nominal GDP / GDP deflator)*100 => ...

Q: 50 45 Profit or Loss 40 35 ATC 15 AVC 10 MC 5 4 10 12 14 16 18 20 QUANTITY (Thousands of sweaters) I...

A: In perfect competition, eqm quantity is found by the intersection of MC(marginal cost) and P(price) ...

Q: Enrico Suarez has decided to purchase a house instead of renting an apartment. He can a ord a monthl...

A: The mortgage is an agreement between a lender and the party taking loan.

Q: a) Compute the nominal GDP in 2018. b) Compute the real GDP in 2018? c) Compute the nominal GDP in...

A: Given 2018 as the base year Nominal GDP = Current Year price * Current year quantity Real GDP = Pri...

Q: Table 5.1 1 year 2 years 2.25% З years 3.25% 1.50% Table 5.1 shows the interest rates for Treasury s...

A: Bonds refers to the type of instrument that represents debt of a borrower to a lender. It is usually...

Q: For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds d...

Q: The low rate of inflation in the 1990s is probably due to Multiple Choice the fact that businesses h...

A: In an economy, when talking about low inflation rate, it is the situation when economy is having eno...

Q: PROBLEM IV. Consider an industry consisting of two firms (i = 1,2) that are engaged in a Bertrand pr...

A: Let's first learn that what is actually collusive pricing. It is said to be a scenario when few comp...

Q: Given the Input-output matrix Industry Oil Final Demand Industry Health 240 120 120 120 Housing 144 ...

A: Following are the demand and input-output combinations which are provided -

Q: Assume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds...

A: GDP deflator and CPI are both measures of inflation. GDP deflator measures changes in price keeping ...

Q: Suppose the price of crude oil increases and we produce just enough crude oil for our own consumptio...

A: Here, it is given that the price of cruise oil increases and there is no export or import of crude o...

Q: Which of the following statements about productivity is not true? O A. It is not directly observable...

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any sp...

Q: A manufacturer can sell x number of units of its products produced per day át a priCe o (35 – 0.10x)...

A: (a) Demand equation: p = 35 - 0.10x Where p is price, x is the number of units of product ---------...

Q: Investors may view the euro area with suspicion because one of its member's public debt increases dr...

A: The outflow or the inflow of a currency depends upon its relative strength in the international mark...

Q: Q3. There are two firms selling differentiated products. Firm A faces the following demand for his p...

Q: Suppose that the University of Alabama and Clemson are making spending decisions for theupcoming yea...

A: Meaning of Decision Theory under Nash Equilibrium: The term decision theory refers to the situatio...

Q: 13. At a Phoenix game 150,000 tickets were sold at $45 apiece. The game was sold out and some people...

A: Market equilibrium It refers to a situation at which the demand of a commodity or service is equal t...

Q: al producer and 10 million tons are imported. The steel producer produces 10 million tons of steel a...

Q: The following graph represents the demand and supply for pinckneys (an imaginary product). The black...

A: Equilibrium in the market occurs at the intersection of demand and supply curves, where quantity dem...

Q: Using the table below answer the following question Price Quantity demanded Quantity supplied $...

A: The equilibrium price in the market for skateboards in $500. At this price the quantity demanded and...

Q: In a given market, a competitive equilibrium is described by A) a price only. B) a quantity only. C...

A: In a competitive market there are many buyers and sellers. Demand curve slopes downwards while suppl...

Q: What do you call the Circular flow of goods and income of households and firms with the government a...

A: The Circular Flow of goods and income of households and firms with the government and foreign countr...

Q: 1. In a homogenous good Bertrand duopoly model with complete and symmetric information the Bertrand ...

A: In a homogenous good Bertrand duopoly model with complete and symmetric information the Bertrand pa...

Question

Why is deflation or disinflation an economic problem?
O a.
All of the answers are correct
O b. It discourages firms from producing output
It affects the value of wealth that people hold
O d. It affects income distribution, such as retired workers

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

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

Suppose that at the start of 1999, Ari invests their money in a savings account earning 3.6% interest. If inflation is 1% during 1999, calculate the real interest rate on Ari’s savings account by the end of 1999. Has the inflation-adjusted value of Ari’s savings increased or decreased?
The “prime” interest rate is the rate that bankscharge their best customers. Based on the nominalinterest rates and inflation rates in Table 19.10, inwhich of the years would it have been best to be alender? Based on the nominal interest rates and inflationrates in Table 19.10, in which of the years given wouldit have been best to be a borrower?
The CPI is more commonly used as a gauge of inflation than the GDP deflator is becaust the O a. GDP deflator cannot be used to gauge inflation. O b. CPI is easier to measure. O c. CPI better reflects the goods and services bought by consumers. O d. CPI includes more goods and services that the GDP deflator does. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
2.(a) If the nominal interest rate is 3%, but the real interest rate is lower than expected, does theborrower gain or lose? Does the lender gain or lose?(b) What might explain a lower-than-expected real interest rate?
how the nominal interest rate, the real interest rate, and inflation are relatedthrough the Fisher equation.
Pls answer in simple words, 8-10 sentences enough. what is the short-run and long-run on the nominal interst rate from an increase in the growth rate of the quantity of money?
Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition of the results on consumption, investment, produc- tivity, wages and price levels. [Note, I am looking for the correlation between each of these items and income. Give leads and lags only when the most important correlation is not contemporaneous. You may trust the author of the book on this one.]
1.21 If real GDP falls from one period to another and the price level stays the same, we can conclude that…a) Nominal GDP increasedb) Inflation decreasedc) Nominal GDP also decreasedd) NDP increased
In what situation would the expected real interest rate be negative? O The nominal interest rate is less than the expected inflation rate. O The nominal interest rate is greater than the real interest rate. O The expected inflation rate is greater than the actual inflation rate. O The expected real interest is greater than the expected inflation rate. O The actual inflation rate is greater than the nominal interest rate. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
The CPI tracks the average change in prices of a basket of goods and services overtime, whereas the UNRATE is the percentage of the labour force that is unemployed.By examining the cointegration between these two variables, you can gain insightsinto the relationship between inflation and unemployment in the US economy. Thequarterly series is complete and seasonally adjusted. a) From a theoretical perspective, are these two series expected to becointegrated? Justify your answer. b)How do expectations about future economic conditions influence the speed ofadjustment? Are there any other factors that might affect the speed of adjustment?
13. Which of the following cannot be used to measure inflation?a) GDP deflationb) Expenditure methodc) Producer price indexd) Consumer price indexWhich of the following equations in correct?a) Nominal interest rate = Real interest rate-Inflationb) Real interest rate = Nominal interest rate + inflationc) Real interest rate = Nominal interest rate x inflationd) Real interest rate = Nominal interest rate-inflation
Year Price of T-Shirt Quantity of T-Shirt Price of Pajamas Quantity of Pajamas 2015 10 120 12 200 2016 12 300 15 200 2017 14 275 18 180 Calculate the inflation rate for 2015, 2016 and 2017. Given the following on a closed economy.C = 40 + 0.8Yd C= consumptionI = 55 – 200r I= InvestmentG = 20 G = government spendingT = 20 T = TaxesYe = 400 Ye = National Incomer = rate of interest 3. Determine the following: The equilibrium level of consumptionThe level of investmentThe level of interest rateThe level of Private savingsThe level of Public savingsThe level of national savings