ylor just received a 3% pay increase but the current rate of inflation is 4%. We can say that Taylor's real wage has elect one: O a. remained the same b. fallen by 1% c. risen by 1%. W

High and unexpected inflation has a greater cost O for those who have fixed nominal wages than for those who have nominal wages that adjust with inflation. for those who borrow than for those who save. O All of the above are correct. O for those who hold a little money than for those who hold a lot of money.

Firms require capital to invest in productive opportunities. The best firms with the most profitable opportunities can attract capital away from inefficient firms with less profitable opportunities. Investors supply firms with capital at a cost called the interest rate. The interest rate that investors require is determined by several factors, including the availability of production opportunities, the time preference for current consumption, risk, and inflation. Suppose the Federal Reserve (the Fed) decides to tighten credit by contracting the money supply. Use the following graph by moving the black X to show what happens to the equilibrium level of borrowing and the new equilibrium interest rate. INTEREST RATE, r (Percent) 0 16 0 D S2 CAPITAL (Billions of dollars) S1 8 Equilibrium

If an economy always has inflation of 10 percent peryear, which of the following costs of inflation will itNOT suffer?a. shoeleather costs from reduced holdings of moneyb. menu costs from more frequent price adjustmentc. distortions from the taxation of nominal capitalgainsd. arbitrary redistributions between debtors andcreditors

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on The quality change bias is most likely to put The quality change bias is most likely to put_ into the CPI and so.... into the CPI and so O a. a downward bias; understate O b. a random bias; randomly overstate or understate O c. an upward bias; understate O d. a downward bias; overstate e. an upward bias; overstate Clear my choice the inflation rate.

What causedthe Great Inflation of the 1970s, and why has inflation been so much lowerin recent decades?