Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 30, Problem 8PA
Subpart (a):
To determine
Inflation and its related effects.
Subpart (a):
To determine
Inflation and its related effects.
Subpart (c):
To determine
Inflation and its related effects.
Subpart (d):
To determine
Inflation and its related effects.
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Explain the effects of inflation on various groups of people in the society.
On 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.
Suppose that people expect inflation to equal 5 percent, but in fact, prices rise by 7 percent.
Which of the following groups or individuals are hurt by this unexpectedly high inflation rate? Check all that apply.
The government
A union worker in the second year of a labor contract
A homeowner with a fixed-rate mortgage
A college that has invested some of its endowment in government bonds that are not indexed Treasury bonds
Chapter 30 Solutions
Principles of Economics (MindTap Course List)
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Similar questions
- Menu costs and shoe leather costs are the two costs of inflation. Explain each of them with some real world examples.arrow_forwardAnalyze the causes of inflation. Give examplesarrow_forwardSuppose you borrow $100 from a bank at 5 percent interest for 1 year and the inflation rate that year is 10 percent. Was this loan advantageous to you or the bank?arrow_forward
- Which of the following is the positive impact of inflation? A) Inflation causes the real value of saving for a saving person to eroded. B) Inflation makes debtors pay less in real return. C) Fixed-income people have the same income but a high cost of living. D) lender will not have the option to earn interest.arrow_forwardExplain how the average inflation rates are calculated?arrow_forwardSuppose that people expect inflation to equal 3%, but in fact prices rise by 5%. Describe how this unexpected high inflation rate would help or hurt the following: a. the government; (3%) b. a homeowner with a fixed-rate mortgage; (3%) c. a union worker in the second year of a labour contract; and (3%) d. a college that has invested some of its endowment in government bonds. (3%)arrow_forward
- Explain one remedy for inflation.arrow_forwardGive four examples of goods or services that have exhibited inflation in recent years.arrow_forwardBased on real life situations and what we learn in Economics, is there any benefit to inflation? Explain in great detail with good economic basis.arrow_forward
- Can the issuance of government securities reduce the expectation of inflation?arrow_forwardIn 1 paragraph, describe what has happened to inflation over the past decade.arrow_forwardSuppose there are 1200 units of money on an island, but money grows by 5.32% per year. Islanders spend each unit of money 2.3 times per year on average and this spending grows by 1.98%. The price level is at 34. GDP is expected to grow at 4.83%. What is the level of inflation? Answer this as a percentage without the percentage sign and round this to two digits after the decimal. ex. If you found the rate to be 5.125%, answer 5.13.arrow_forward
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