Economics Basics Practice Questions 1) How does supply and
... Explanation: The increase in production cost of root beer will cause an increase of price of the root beer. This will cause the demand of root beer to fall because consumers will find substitute beverages that will cost less money to purchased 3) Pick the best definition of ‘Economies of Scale’. a) ...
... Explanation: The increase in production cost of root beer will cause an increase of price of the root beer. This will cause the demand of root beer to fall because consumers will find substitute beverages that will cost less money to purchased 3) Pick the best definition of ‘Economies of Scale’. a) ...
4: Inflation effect on capital budgeting decisions
... materials. This could be "passed on" to consumers, or it could be absorbed by profits, or offset by increasing productivity. In India and the United States, an earlier version of the PPI was called the Wholesale Price Index. Commodity price indices, which measure the price of a selection of commodit ...
... materials. This could be "passed on" to consumers, or it could be absorbed by profits, or offset by increasing productivity. In India and the United States, an earlier version of the PPI was called the Wholesale Price Index. Commodity price indices, which measure the price of a selection of commodit ...
Different Measures of Inflation
... example, it is heavily influenced by wages and benefits for public employees, including teachers. Best Uses for the Different Measures The CPI continues to be the most well-known and widely-used measure of inflation, but most analysts prefer the PCE price index when analyzing how the price of consu ...
... example, it is heavily influenced by wages and benefits for public employees, including teachers. Best Uses for the Different Measures The CPI continues to be the most well-known and widely-used measure of inflation, but most analysts prefer the PCE price index when analyzing how the price of consu ...
Homework 5
... 3. Money Market Assume there is a negative supply shock in the United States which reduces real and nominal GDP. The central bank wants to conduct monetary policy to stabilize the price level. Draw a picture of the money market. Show how the money supply and demand curve would shift in response to ...
... 3. Money Market Assume there is a negative supply shock in the United States which reduces real and nominal GDP. The central bank wants to conduct monetary policy to stabilize the price level. Draw a picture of the money market. Show how the money supply and demand curve would shift in response to ...
Time Inconsistency and the Exchange Rate Channel of
... measure of marginal costs) and expected future inflation. The New Keynesian Phillips curve is clearly attractive on theoretical grounds, since it can be derived from optimising behaviour. The empirical evidence is somewhat mixed, however.2 The aim of this paper is not to debate the realism of the as ...
... measure of marginal costs) and expected future inflation. The New Keynesian Phillips curve is clearly attractive on theoretical grounds, since it can be derived from optimising behaviour. The empirical evidence is somewhat mixed, however.2 The aim of this paper is not to debate the realism of the as ...
Economics 259 Final Exam Spring 2016 Name: Before beginning
... Y2 Y = Y1 Y 21.c. The economy finds itself in the short-run equilibrium above the natural rate of output: Y2 > Y1 (point B). Because aggregate demand is higher than the long-run aggregate supply at the price level P1, there will be an upward pressure on the price level. Over time, prices can change ...
... Y2 Y = Y1 Y 21.c. The economy finds itself in the short-run equilibrium above the natural rate of output: Y2 > Y1 (point B). Because aggregate demand is higher than the long-run aggregate supply at the price level P1, there will be an upward pressure on the price level. Over time, prices can change ...
Exam 3 - UTA.edu
... A) real wage rate rises, and there is an increase in the quantity of real GDP supplied. B) nominal wage rate falls, and there is an increase in the quantity of real GDP supplied. C) nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied. D) real wage rate falls, and th ...
... A) real wage rate rises, and there is an increase in the quantity of real GDP supplied. B) nominal wage rate falls, and there is an increase in the quantity of real GDP supplied. C) nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied. D) real wage rate falls, and th ...
Chapter 33 — TRADEOFF BETWEEN INFLATION AND
... If expectations of inflation adjust quickly to actual inflation, a recession induced by contractionary monetary policy will be less severe. In this case, people's expectations adjust quickly, so the short-run Phillips curve shifts quickly to restore the economy to long-run equilibrium at the natural ...
... If expectations of inflation adjust quickly to actual inflation, a recession induced by contractionary monetary policy will be less severe. In this case, people's expectations adjust quickly, so the short-run Phillips curve shifts quickly to restore the economy to long-run equilibrium at the natural ...
expectations of inflation
... Can changes in the way central banks are governed affect inflation expectations? Increased Political Independence for the Bank of England Lowered Inflation Expectations ...
... Can changes in the way central banks are governed affect inflation expectations? Increased Political Independence for the Bank of England Lowered Inflation Expectations ...
Economics 104B, Section 41 Instructor: Tara Sinclair
... You will gain and your friend will lose. Because you set the real interest rate on your loan (r) equal to 0, you must have set the nominal interest rate (i) equal to the inflation rate (π). If inflation turns out to be lower that what you expected, the actual real interest rate (r) will be positive ...
... You will gain and your friend will lose. Because you set the real interest rate on your loan (r) equal to 0, you must have set the nominal interest rate (i) equal to the inflation rate (π). If inflation turns out to be lower that what you expected, the actual real interest rate (r) will be positive ...
Economics 154b Spring 2006 National Income
... Steve Landefeld (U.S. Bureau of Economic Analysis) ...
... Steve Landefeld (U.S. Bureau of Economic Analysis) ...
Unit 3 Vocabulary list
... The profit earned on a project expressed as a percentage of its cost. ...
... The profit earned on a project expressed as a percentage of its cost. ...
Ogbokor. Is Namibia`s inflation import driven
... Inflation is a complex process and it is very difficult to construct an empirical model for a country. However it is possible to find the key variables impacting the inflation process in a country like Namibia. On the basis of the monetarists’ argument that inflation is always and everywhere a monet ...
... Inflation is a complex process and it is very difficult to construct an empirical model for a country. However it is possible to find the key variables impacting the inflation process in a country like Namibia. On the basis of the monetarists’ argument that inflation is always and everywhere a monet ...
ECON 2020 – 200 Spring 2003 Homework #10: Chapter 14
... a. lower prices increase the value of money holdings and consumer spending increases. b. lower prices decrease the value ofmoney holdings and consumer spending decreases. c. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases. d. lower prices ...
... a. lower prices increase the value of money holdings and consumer spending increases. b. lower prices decrease the value ofmoney holdings and consumer spending decreases. c. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases. d. lower prices ...
Demand-Pull Inflation
... Aggregate Supply (AS) is the total of all the firm (market) supply curves. It shows the quantity of real GDP produced at different price levels. Short-run AS slopes upward because an increase in the price level (while production costs and capital are held constant on the short-run), means higher pro ...
... Aggregate Supply (AS) is the total of all the firm (market) supply curves. It shows the quantity of real GDP produced at different price levels. Short-run AS slopes upward because an increase in the price level (while production costs and capital are held constant on the short-run), means higher pro ...
Chapter 23 - Five debates over macroeconomic policy
... – Can do just the opposite – Economic conditions can easily change ...
... – Can do just the opposite – Economic conditions can easily change ...
chapter 9 - chass.utoronto
... provide an incentive to work more--but only by a fairly small amount. Therefore, we see a slightly higher real GDP with a large increase in the price level in the long run. 1.b. Supply-side economics is any policy measure that will increase potential GDP by shifting the long-run (vertical) AS-curve ...
... provide an incentive to work more--but only by a fairly small amount. Therefore, we see a slightly higher real GDP with a large increase in the price level in the long run. 1.b. Supply-side economics is any policy measure that will increase potential GDP by shifting the long-run (vertical) AS-curve ...
Exam paper - Institute and Faculty of Actuaries
... A government has not raised sufficient taxation to finance its current spending. Discuss the relative merits of the following two alternatives to finance its expenditure, including the likely effects on interest rates and the inflation rate. Method 1: Finance its expenditure by selling government bo ...
... A government has not raised sufficient taxation to finance its current spending. Discuss the relative merits of the following two alternatives to finance its expenditure, including the likely effects on interest rates and the inflation rate. Method 1: Finance its expenditure by selling government bo ...
Final Exam
... 6. Albonia has a fixed exchange rate with the US dollar and Balbonia maintains a real interest rate which rises when domestic inflation rises. We could say that: a. GDP would decline more sharply in Balbonia than in Albonia if oil prices rose and GDP would decline more sharply in Balbonia than in Al ...
... 6. Albonia has a fixed exchange rate with the US dollar and Balbonia maintains a real interest rate which rises when domestic inflation rises. We could say that: a. GDP would decline more sharply in Balbonia than in Albonia if oil prices rose and GDP would decline more sharply in Balbonia than in Al ...
macroeconomic principles (econ
... These are comparative static models rather than dynamic models that would be more realistic. Still we can get a good understanding of fluctuations and adjustment. The economy is self-adjusting to full employment. There is debate about how fast the economy adjusts and whether the government can speed ...
... These are comparative static models rather than dynamic models that would be more realistic. Still we can get a good understanding of fluctuations and adjustment. The economy is self-adjusting to full employment. There is debate about how fast the economy adjusts and whether the government can speed ...
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time. The opposite of inflation is deflation.Inflation affects an economy in various ways, both positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.Inflation also has positive effects: Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This increase in spending and investment can benefit the economy. However it may also lead to sub-optimal use of resources. Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to wage inflation, but your mortgage payment will stay the same. Over time, your mortgage payment will become a smaller percentage of your earnings, which means that you will have more money to spend. Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy. Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity. When demand for labor falls but nominal wages do not, as typically occurs during a recession, the supply and demand for labor cannot reach equilibrium, and unemployment results. By reducing the real value of a given nominal wage, inflation increases the demand for labor, and therefore reduces unemployment.Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like ""pushing on a string"". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.Today, most economists favor a low and steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.