Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 14, Problem 6QQ
To determine
The lowering of inflation and people's expectations.
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Explain inflation. Is zero inflation good target?
If the economy is in long-term equilibrium and cost of energy for production increases, which of the following is likely to occur?
Select one:
a. It will lead to demand-pulled inflation and create an expansionary gap.
b. It will lead to demand-puled inflation and create a contractionary gap.
c. It will lead to cost-pushed inflation and create an expansionary gap.
d. It will lead to cost-pushed inflation and create a contractionary gap.
e. It will create hyperinflation in the economy, but will not create an economic gap.
Explain one harm associated with unexpected inflation that is not associated with expected inflation. Then explain one harm associated with both expected and unexpected inflation.
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Similar questions
- The cost of inflation reduction is a large, permanent increase in unemployment. a.true b.falsearrow_forwardQ. Explain why economists consider inflation at too high a level to be a bad thing.arrow_forwardWhich of the following is not an essential element of inflationtargeting? A. increased transparency of monetary policy B. a mechanism for firing the head of the central bank if the inflation target is not achieved C. an institutional commitment to price stability as the primary, long-run goal of monetary policy D. public announcement of a numerical target for inflationarrow_forward
- In 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_forwardExplain the two costs of inflation from the perspective of economists.arrow_forwardIf inflation is at target, phi = phi* , then actual output must coincide with potential output, Y=Y*. a. True b. Falsearrow_forward
- Find a period in Canadian history that experienced demand pull inflation. a) Describe the time period and rate of inflation b) graph illustrating the effects of demand pull inflation on the economy at that time. 2. Find a period in Canadian History that experienced cost push inflation a) describe the situation and cause of this type of inflation b) graph illustrating the effects of cost push inflation on the economy at that time.arrow_forwardExplain the pros and cons of inflation.arrow_forwardIf policymakers accommodate an adverse supply shock, then in the short run the unemployment rate a. and the inflation rate fall. b. and the inflation rate rise. c. rises and the inflation rate falls. d. falls and the inflation rate rises.arrow_forward
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