9. How will (a) an unexpected 3 percent fall in the price level in the goods and services market differ from (b) 1 percent inflation when 4 percent inflation had been expected? What impact would (a) and (b) have on the real price of resources, profit margins, output, and employment? Explain.

3. Explain any three costs associated with inflation? Also, provide a real-world example of hyperinflation that happened in the past.

Which of the following is NOT one of the negative effects associated with inflation? O Menu costs, when producers need to constantly update prices to reflect the changing value of the dollar. O The negative impact on borrowers with fixed payments (like mortgage payments). O Shoe leather costs, the cost associated with consumers efforts to ajdust behavior to counter-act inflation. O The lowering of the purchasing power for individuals who hold large amounts of cash. Because of inflation, what happens to the value of the REAL minimum wage during periods of time when congress keeps the minimum wage constant (like it has been since 2009). O Since prices go up, real minimum wage decreases. O The value of the real minimum wage is determined by the level of effort put in by workers. If the congress is keeping the minimum wage constant, the real minimum wage is not changing. O The real minimum wage increases since inflation makes all prices increase.

Question 12 In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems. O True False

“Members of Congress are interested in increasing the minimum wage from its current rate of $7.25 an hour to $15. What effect will this have on the unemployment rate for low-skilled workers? How is this likely to impact equilibrium output and the price level in the short run?"

14) The A) increase; rigid C) decline; flexible in employment during a recession is smaller if wages are B) decline; rigid D) increase; flexible

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1) Assume that the real wage in an economy is held above equilibrium. a. Graphically illustrate how an increase in demand for labor will change the number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and after the increase in demand. b. Explain in words what happens to the number of unemployed as a result of this change. 2) In an economy, if 5 percent of the employed lose their job every month (s = 0.05) while 15 percent of the unemployed find a job every month (f = 0.15), what is the steady rate (equilibrium rate) of unemployment of the economy?

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6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky-wage theory asserts that output prices adjust more quickly to changes in the price level than wages do, in part because of long-term wage contracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. If the actual price level turns out to be 90, the firm's output prices will , and the wages the firm pays its workers will remain fixed at the contracted level. The firm will respond to the unexpected decrease in the price level by v the quantity of output it supplies. If many firms face similarly rigid wage contracts, the unexpected decrease in the price level causes the quantity of output…