Give proper explanation and solve all parts will definitely upvote.Hand written solution is not allowed. On average, consumers' inflation expectation generally are about the same rate as core inflation and the two variablesmove together over time, although there are periods when they differ somewhat for a while.O TrueFalseQUESTION 12Which of the following statements best describes the inflation error?The error is rising steadily over timeO The error is typically positive during recessions and negative during expansionsOThe error tends to be positive when inflation is relatively high and negative when inflation is relatively lowOn average, the error is about zero (0%) every yearQUESTION 13The iration expectation error can change rapidly over a short period of time by a relatively large amount (2 percentagepoints of more).O TrueFalse

Answer 13:-The best answer is:C) The error tends to be positive when inflation is relatively high…

Answered: On average, consumers' inflation…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Measuring The Cost Of Living

Section: Chapter Questions

Problem 9PA

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Similar questions

The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
QUESTION 4 Suppose you are told that the price of pears in the second period is actually 0.5. Using this information calculate the rate of inflation using the consumption basket for the first period. The answer is O Zero inflation O 25 percent inflation O 6 percent inflation O Minus 6 percent deflation O None of the above QUESTION 5 gnoring quality change generaly leads to an O Overstatement of inflation * O An understatement of inflation O Has no impact on measured inflation O There is not enough information to answer this question Will lead to deflation
Questron 3 Suppose the nominal interest rate is currently 24 per cent and expected inflation is 16 per cent. IF the expected inflastion rate doubles to 3.2 per cent, wtich of the foloving would be an implication of the Fisher effect? O The real interest ate talls by 1.6 per cent O The nominal interant rate doubies to 48 per cent O The nominal interast rate rises n 5.6 per cent O The nominal incerest rate des co 4.0 por cent
Which of the following will increase our current inflation rate t? None of the answers are correct O a. O b. A beneficial cost shock (positive supply shock) O c. A recessionary gap in period t-1 O d. tt-1
Suppose that a borrower and a lender agree on thenominal interest rate to be paid on a loan. Theninflation turns out to be higher than they bothexpected.a. Is the real interest rate on this loan higher or lowerthan expected?b. Does the lender gain or lose from thisunexpectedly high inflation? Does the borrowergain or lose?c. Inflation during the 1970s was much higher thanmost people had expected when the decade began.How did this unexpectedly high inflation affecthomeowners who obtained fixed-rate mortgagesduring the 1960s? How did it affect the banks thatlent the money
Refer to the accompanying figure. LRAS Inflation a A 0, y' Output O O An economy is currently in long-run equilibrium at point B, at an inflation rate of m, which is too high to sustain economic growth. If an anti-inflationary policy is enacted, the economy will be in short-run equilibrium at point creating gap. O SRAS O SRAS AD' AD A; an expansionary A; a recessionary D; a recessionary D; an expansionary
Which of the following shifts in aggregate demand and short-run aggregate supply would cause an unambiguous increase in inflation? Select one: O a. A decrease in AD and an increase in SRAS O b. No change in AD and an increase in SRAS O c. An increase in AD and an increase in SRAS d. An increase in AD and a decrease in SRAS O e. A decrease in AD and a decrease in SRAS
A common cause of falling inflation is O Weaker growth in demand than in supply for large parts of the economy O High fees and taxes O Strong wage development O Low interest rates and rising investment
Why could inflation be persistent in times of output gaps? O a. Because of inflation expectations O b. Because of wage contracts that were signed some time ago O c. Because of menu costs in adjusting prices frequently O d. All of the answers are correct
A generalization of the fisher effect that can be applied to other variables is the relationship between real price growth and nominal price growth if we know the inflation rate. We can express this relationship T, where g is the growth rate (real or nominal) and t is inflation rate. Use this as greal information for problems 10-12. gnomial - 10. Assume that data shows the nominal price of a new Nissan Maxima was $12,000 in 1992 and $15,000 in 2002, but you also found a reliable source that claimed real price growth for Maximas this claim about real price growth A) 16.5% B) 5% C) 10% D) 8.5% E) Not enough information to determine was closer to 8.5%. For experienced from 1992 to 2002? to be true, how much inflation was 11. Assume that the inflation rate is the level you found in 10. If the real price growth for a Mercedes- AMG was 10%, and the nominal price in 1992 was 2002? $42,000; what is the nominal price of the Mercedes in A) $50,000 B) $53,130 C) $56,750 D) $60,070 E) $77,000 12.…
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.
Which one of the following is NOT true about the costs of inflation to society? O Unexpected higher inflation rate hurts lenders. O Higher inflation rate increases the cost of printing menus and catalogues for businesses. Higher inflation rate creates general inconvenience to the public Unexpected higher inflation rate hurts borrowers O Higher inflation distorts individuals' tax liabilities

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