Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 22, Problem 5DQ
To determine
Misunderstanding about inflation.
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Explain the various measures to control inflation in an economy
Discuss the costs associated with high inflation.
b) Other economists think that there are significant costs associated with inflation above 2-3%. What are
they? Briefly discus
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Economics: Principles & Policy
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- Which situation best illustrates the effects of inflation?arrow_forwardWhy is the axiom of economics state that 2-3% of inflation is a good thing for the economy. Why would it matter since, real gdp isn't growingarrow_forwardHow does excess money actually create inflation? Select one: a. By raising the amount of imports when the excess money is used to buy additional goods. b. By raising the cost of factors of production when producers attempt to increase output to meet the additional demand. c. By raising the rate of interest required to hold a greater money stock. d. By raising the time it takes to produce output. e. By raising the exchange rate.arrow_forward
- If you are hired by an organization, you would be least hurt by inflation ifarrow_forwardIf the government is concerned about high inflation, it will likely implement some sort ofarrow_forwardOn the way into school you hear the following report on the radio: "inflation for the month of February was 0.4%. Over the year inflation was 2.2%." Which of the following options best explains what these figures mean? Select one: a. Inflation in February was much slower than it was in other months from the past year. b. The prices of household necessities, excluded household luxuries, increased by 2.2%, compared to 12 months ago. c. The prices of the things a typical urban consumer buys, as estimated by the Bureau of Labor Statistics, increased on average 2.2%, compared to 12 months ago. d. The government increased prices by 2.2% over the past year in order to keep pace with production costs.arrow_forward
- Inflation and international tradeIdentify which statements are true and which ones are false. For all statements, briefly explain why they are true or false. a) Economists projected inflation rate to be 4% in 2022 in country X. In reality, inflation rate was 7%. Borrowers in country X are better off.b) The government in country X decided to print more money and give transfers of $1,000 to citizens who recently retired. It will cause a decrease in money supply, so the value of money will increase, and prices will decrease.c) Countries X and Y are neighbors. When the government in country X decides to print more money, the value of currency of country Y increases, so this currency appreciates, while the currency of country X depreciates.d) Budget surplus in country X causes a shift of the supply curve for loanable funds to the left, so the real interest rate increases. Then, the net capital outflow decreases, and hence the real exchange rate decreasesarrow_forward“state three reasons why voters should care about high inflation and evaluate the merit of the arguments"arrow_forward
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