13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617390




13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617390
Chapter 14, Problem 10QP
Textbook Problem

“One-shot inflation may be a demand-side (of the economy) or a supply-side phenomenon, but continued inflation is likely to be a demand-side phenomenon.” Do you agree or disagree with this statement? Explain your answer.

To determine

One shot inflation and continued inflation.

Explanation of Solution

Agree. The continued inflation is more likely to be a demand side phenomenon. This is due to the reason that continues increase in aggregate demand, which increases the price level and is more likely to occur than the continued supply shocks. From the demand side, if the Fed increases the money supply, it will result in an increase in the aggregate demand and hence, the price level results in one shot inflation. If the increase in money supply occurs every year, then there will be continued inflation, which is likely to occur...

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Chapter 14 Solutions

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Ch. 14.4 - The Fed affects only the interest rate via the...Ch. 14 - What are the assumptions and predictions of the...Ch. 14 - Can the money supply support a GDP level greater...Ch. 14 - In the simple quantity theory of money, the AS...Ch. 14 - In the simple quantity theory of money, what will...Ch. 14 - According to the simple quantity theory of money,...Ch. 14 - In monetarism, how will each of the following...Ch. 14 - According to monetarism, an increase in the money...Ch. 14 - Suppose the objective of the Fed is to increase...Ch. 14 - What is the difference in the long run between a...Ch. 14 - One-shot inflation may be a demand-side (of the...Ch. 14 - Explain how demand-induced, one-shot inflation may...Ch. 14 - In recent years, economists have argued about the...Ch. 14 - With respect to the interest rate, a. what is the...Ch. 14 - Suppose the money supply rises. Is the interest...Ch. 14 - To a potential borrower, which would be more...Ch. 14 - Suppose the money supply rises on Tuesday and by...Ch. 14 - Suppose the money supply increased 30 days ago....Ch. 14 - What does inflation look like in a country that...Ch. 14 - In an equation-of-exchange framework, the price...Ch. 14 - How will things change in the ADAS framework if a...Ch. 14 - Graphically show each of the following: a....Ch. 14 - Use the accompanying figure to answer questions a...Ch. 14 - Starting with a position of long-run equilibrium,...Ch. 14 - What does the real interest rate equal, given the...Ch. 14 - What does the nominal interest rate equal, given...Ch. 14 - Can total expenditures ever be greater than the...Ch. 14 - Take a look at Exhibit 6(a). If the economy starts...

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