MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 1, Problem 3QQ
To determine
Identify which option is correct.
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compare between demand pull and cost push inflation
Let's say the inflation rate in an economy turns out to be higher than expected. Will the following people, or bank, be affected? Helped, hurt, or unaffected?
a. Someone keeping a large quantity of cash in a shoe box in their closet.
b. A bank lending money at a fixed rate of interest
c. A union member with a COLA wage contract
d. A person who is not due to receive a pay raise for another 11 months
Define Inflation?
Chapter 1 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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- Why a negative inflation (i.e., deflation) is worse than inflation?arrow_forwardExplain inflation. Is zero inflation good target?arrow_forwardWhich statement best describes U.S. inflation between 1982 and 2000? A. It was virtually nonexistent. It was consistently high, often climbing into the double digits. B. It was widely variable, swinging from zero to over 10%. C. It was neither very high nor very low.arrow_forward
- Define inflation. Explain why inflations needs to be managed.arrow_forwardInflation is defined as a sustained increase in the price level. is this true or false?arrow_forwardIn theory, inflation not only ______ the value of consumers' money over time, but it also increases the ____ of producers over time. a.Decreases, wages b.Increases, interest rates c.Decreases, unemployment d.Increases, real GDParrow_forward
- Which of these words or phrases do not describe what inflation is? a.Decrease in price level b.General prices c.Over a period of time d.Sustained increase in pricesarrow_forwardWhat are the various effects of high inflationarrow_forwardWhat is inflation ? Briefly explain the costs of inflation . Use your outlined cost of inflation with examples to discuss whether inflation is better than deflation .arrow_forward
- Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate?arrow_forwardCalculating Real GDP, Price Indices, and Inflation. Using the data from the table below, answer the following questions: Quantities Produced 2011 2012 CDs 105 125 Tennis Rackets 210 220 Real GDP in 2011 using 2011 prices is $24255. (Enter your response as an integer.) Real GDP in 2012 using 2011 prices is $25725. (Enter your response as an integer.) Real GDP grew by 6.06 percent. (Enter your response as a percentage rounded to two decimal places.) The price index for GDP (GDP Deflator) for 2012 using 2011 as the base year is Price per CD $21 $25 Prices Price per Tennis Racket $105 $125 (Enter your response rounded to two decimal places.)arrow_forwardWhich of the following is most likely to be true if the rate of inflation rises sharply? a. Businesses will be able to manage rising costs b. Businesses will not be able to manage rising costs c. Businesses are less likely to raise selling prices d. Businesses can reduce selling pricesarrow_forward
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