Higher potential output levels without any monetary policy intervention will lead to Multiple Choice higher real interest rates. lower real interest rates and higher inflation rates. lower real interest rates and lower inflation rates. higher real interest rates and lower inflation rates.
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Higher potential output levels without any
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- A way for policymakers to avoid the problems that deflation can present and still meet their objective of price stability is to Multiple Choice set a higher inflation target. target a nominal interest rate of zero. keep the monetary base fixed. set a target of zero inflation.Effectiveness of anti-inflationary policies in conditions of adverse supply shocks.The Canadian govt can reduce national dent by an interest and inflation policy which keeps the rate of inflation above the rate of interest. True/False/Uncertain.
- A fully anticipated increase in the inflation rate can lead to Group of answer choices higher market interest rates. a decrease in barter. increased efficiency. greater speculative activity.Inflation does not affect all prices equally. This ragged inflation causes relative-price variability, and consumer decisions Question 33 options: are distorted and the ability of markets to efficiently allocate factors of production is impaired. are distorted, but markets are still able to efficiently allocate factors of production. are not distorted, but the ability of markets to efficiently allocate factors of production is impaired. are not distorted and markets are still able to efficiently allocate factors of production.Which of the macroeconomic policies listed below is contractionary and will help reduce the rate of inflation? Group of answer choices A balanced budget increase in both government spending and autonomous taxes. Open market purchases by the central bank. Higher transfer payments to the general population to help offset higher prices. Promotion of an appreciated domestic currency in foreign exchange markets.
- An economy is currently experiencing inflation that exceeds the target rate set by the central bank. Identify and explain costs to an economy that are associated with inflation. Identify and explain the benefits to an economy that stem from having price level stability.FILL IN THE BLANKS Inflation measures the changes in the level of in the economy. Demand-pull inflation is caused by a shift in the aggregate demand curve, while cost-push inflation is caused by a shift of the aggregate supply curve. When the price level is increasing by an extremely high rate, the economy is said to be experiencing . Stagflation occurs when the economy is experiencing high inflation, high unemployment, and low at the same time. To combat inflation, the government can use contractionary monetary policy which will also lead to interest rates. Note, however, that there is a short-run tradeoff between inflation and as illustrated by the Philips Curve. Inflation is stable when the unemployment rate is equal to the rate of unemployment.Edison receives a portion of his income from his holdings of interest-bearing government bonds. The bonds offer a real interest rate of 4.5% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 10%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. NOTE: options for drop down questions are as follows Compared with lower inflation rates, a higher inflation rate will ______ (increase OR decrease) the after-tax real interest rate when the government taxes nominal interest income. This tends to _______ (encourage OR discourage) saving, thereby _______ (increasing OR decreasing) the quantity of investment in the economy and _______ (increasing OR decreasing) the economy's long-run growth rate.
- A period during which overall inflation rates are positive but falling is: Multiple Choice deflation. zero price level. disinflation. inflation.The cost of inflation reduction is a large, permanent increase in unemployment. true or falseAn economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation:Y = 15,000 - 12,000π, where π is the inflation rate. Initially, the inflation rate is 2 percent or π = 0.02. Potential output Yp equals 14,640.Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number.a) Find inflation and output in short-run equilibrium. Inflation : 0%Output : $0 b) Find inflation and output in long-run equilibrium. Inflation : 0%Output : $0