Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781305176799
Author: Gwartney
Publisher: Cengage
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Chapter 10, Problem 9CQ
To determine
Identify the unexpected change in the price level that causes the expected inflation.
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Demand-pull inflation can develop when...
Chapter 10 Solutions
Macroeconomics: Private and Public Choice
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- If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: A union member with a COLA wage contract Someone with a large stash of cash in a safe deposit box A bank lending money at a fixed rate of interest A person who is not due to receive a pay raise for another 11 monthsarrow_forwardSuppose that inflation increases from Year #1 to Year#2 without growth. Which of the following graphs correctly shows this situation? (Note: Year #2 positions are shown with dark blue lines.) Price Level Price Level a Ps 0 1 LRAS QN Q₁ LRAS ON 0₁ A) Graph A B) Graph B C) Graph C D) Graph D SRAS SRAS UI SRAS, AD, (M-$800 billion; V - 3) MTD AD₂ (M-$820 billion; V = 3) SRAS, (c) MVT Real GDP AD₂ (M-$800 billion; V - 4) AD, (M-$800 billion; V - 3) Real GDP Price Level Price Level Qa 0 ON P₁ O -- 1 1 0₁ ON 2 -=-= LRAS 1 T LRAS 6 ở SRAS, SRAS₂ AD, (M-$800 billion; V-3) (b) AD₂ (M-$780 billion; V- 3) SRAS1 MIV SRAS2 (d) MV↓ Real GDP AD, (M-$800 billion; V-3) AD₂ (M-$900 billion; V=2) Real GDParrow_forwardSuppose 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 bondsarrow_forward
- Examine the effects of inflation in attention to food and accommodation expenses.arrow_forwardAssuming prices are sticky in the short run, a decrease in useful government spending will cause inflation to __________ in the short run and growth to ___________ in the short run. remain unchanged/decrease increase/increase decrease/increase decrease/decrease remain unchanged/remain unchangedarrow_forwardSuppose that people consume only three goods, as shown in this table: 2020 Price Quantity 2021 Price Quantity Tennis Balls Percentage Change $2 100 True $2 100 False Golf Balls Bottles of Gatorade $4 100 $6 100 Complete the following table by computing the percentage change in price for each of the three goods. $2 200 $3 200 Tennis Balls Golf Balls Bottles of Gatorade 0% 50% Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is 50 True or False: If you were to learn that a bottle of Gatorade increased in size from 2020 to 2021, that information would raise your estimation of the inflation rate. %arrow_forward
- A consequence of unanticipated inflation in an economy is that:Group of answer choices the rate of economic growth reaches a maximum. the risks of investing in a business increase. the level of productive activities in the economy increases. the allocation of resources in the economy becomes efficient.arrow_forwarda) Which of the following is not true? Frictional unemployment on the labor market arises from a lack of information in the labor market Cyclical unemployment exists because of a recession It is logically impossible for both the unemployment and the employment rates to both simultaneously increase or decrease together Structural unemployment exists because of mismatched worker skills and job availability Full employment requires that no cyclical unemployment exists on the labor market b) Suppose we have the following: (4th order) Value of trees $5 per tree and 1,000 tree harvested; (3rd order) 1,000 trees fabricated in to $25 wood pulp per ton (1,000 tons): (2nd order) 50,000 rolls of facial tissue ($10 each); (1st order consumer goods) of 30,000 boxes of Kleenex tissue at Safeway for $1 each. Which of the following it the correct calculation of GNP? $540,000 $400,000 $450,000 30,000 None of the above is correctarrow_forwardThe country of Freeland has an aggregate demand curve determined by the equation M + U = 6% Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. Inflation rate (%) 12 11 10 9 8 7 6 5 4 3 2 1 0 -2 -1 0 LRAS 1 2 3 3 4 5 6 Real GDP growth rate (%) prevailing inflation rate: What is the prevailing inflation rate in Freeland? AD What is the prevailing real GDP growth rate? prevailing real GDP growth rate: 7 8 9 10 % %arrow_forward
- Explain three implications of increasing inflation.arrow_forwardAssuming prices and output are somewhat flexible, a decrease in investment will cause inflation to __________ in the short run and growth to ___________ in the short run. increase/decrease increase/increase decrease/increase decrease/decrease remain unchanged/decreasearrow_forwardInflation is defined as a sustained increase in the price level. is this true or false?arrow_forward
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