Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Chapter 21, Problem 9QFR
To determine
(a)
To explain:
The main misconception about inflation.
To determine
(b)
To explain:
The difference between price confusion and problem of future price uncertainty.
To determine
(c)
To explain:
The concept of wealth redistribution and the way wealth redistribution is related to uncertainty in future price.
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Principles of Economics (Second Edition)
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- Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?arrow_forwardWhat has been a typical range of inflation in the U.S. economy in the last decade or so?arrow_forwardDo neoclassical economists see a value in tolerating a little more inflation if it brings additional economic output? Explain your answer.arrow_forward
- Suppose that people expect inflation to be 3 percentbut that, in fact, prices rise by 5 percent. Describehow this unexpectedly high inflation would help orhurt the following:a. the governmentb. a homeowner with a fixed-rate mortgagec. a union worker in the second year of a laborcontractd. a college that has invested some of its endowmentin government bondsarrow_forwardOil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China.With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationWhat is one of the potential effects of the aforementioned inflation on the South African economy?A. Decreased purchasing power of money.B. Increased consumer savings.C. Reduced interest rates on loans.D. Higher demand for imports.arrow_forwardDuring periods of volatile inflation, there is O a. certainty about the price of one good relative to another. O b. less uncertainty C. important information O d. greater uncertainty O e. no informationarrow_forward
- Explain how inflation and income affect-consumer buying decisions.?arrow_forwardIf inflation is increasing and you expect it to continue to the future then you will want to Spend your money slower and sooner Spend your money slower and later O Spend your money faster and later Spend your money faster and soonerarrow_forwardSuppose that in 2019 there is a sudden, unanticipated burst of inflation. Consider the situations faced by the following individuals. Who gains and who loses? Explain why?a. A homeowner whose wages will keep pace with inflation in 2019 but whose monthly mortgage payments to a savings bank will remain fixedb. An apartment landlord who has guaranteed to his tenants that their monthly rent payments during 2019 will be the same as they were during 2018c. A banker who made an auto loan that the auto buyer will repay at a fixed rate of interest during 2019d. A retired individual who earns a pension with fixed monthly payments from her past employer during 2019arrow_forward
- If inflation rises unexpectedly by 5%, indicate foreach of the following whether the economic actor ishelped, hurt, or unaffected:a. A union member with a COLA wage contractb. Someone with a large stash of cash in a safedeposit boxc. A bank lending money at a fixed rate of interestd. A person who is not due to receive a pay raise foranother 11 monthsarrow_forwardThe economy starts out on the curves AD, and SAS.. Some events then occur that generate a cost-push inflation. What might those events have been? Describe their initial effects and explain how a cost-push inflation spiral develops. Which of the following events might cause a cost-push inflation? OA. a decrease in exports B. a decrease in government expenditure C. an increase in the money wage rate or an increase in the money prices of raw materials D. an increase in the quantity of money Starting at point A, the initial effect of a cost-push inflation is a move to point As a cost-push inflation spiral proceeds, it follows the path OA. B; E, G, I OB. C; B, H, G, I OC. C; E, H, I OD. E: I 230- 190 150 110- 70- 30+ Price level (GDP deflator, 2007 = 100) LAS 13 Đ G 8 w H C SAS2₂ SAS, ADO 15 19 Real GDP (billions of 2007 dollars) SASO AD₂ AD₁ 21arrow_forwardPlease give just answer. There is no need to explain. i. If a country experiences high GDP and inflation, followed by a lower GDP and deflation, this is an example of O Unemployment O Recession O the Business Cycle O Supply and Demand O None of the above ji. What causes inflation? O People don't have enough money O People have too much money O People have too much money and many businesses want some of that money People owe a lot of money The government causes inflation by raising interest rates iii. The Water and Diamond Paradox explains: Why supply and demand always meets in the middle of a graph O Marginal utility of diamonds O Why water is inexpensive while diamonds are so expensive O Why water is so expensive while diamonds are inexpensive O None of the above iv. The unemployment rate is: O The number of people who don't want to work The number of people who are working but don't want to work The number of people who don't want to work and are not working The number of people who…arrow_forward
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