Rational expectations theory believes that fully anticipated price-level increases Multiple Choice will lead firms to understand that the same forces that are causing the inflation will result in higher nominal wages, leaving their profits unchanged. will lead businesses to immediately recognize that the higher prices being paid for their products are part of the inflation they had anticipated. do not change real output, even for short periods. All of the answers are correct.

Expectations of inflation are ____________ effective than/as actual inflation in ____________ production costs.  a) less; increasing  b) less; decreasing  c) as; increasing  d) as; decreasing  e) more; increasing

With respect to the concept of inflation, it is correct to say that ________. options:   A)  inflation increases the purchasing power of consumer dollars.   B)  inflation and deflation are really almost synonymous in practice.   C)  the consumer price index is one way to measure inflation.   D)  inflation occurs when the amount of money taken out of the economy exceeds the amount of money put into the economy.   E)  inflation occurs when people have more money to spend as the quantity of goods available increases.

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.

Consider the Efficiency Wage story. Suppose we had several periods of 0 inflation.   Let ST represent the total supply of labor; SNS the supply of non-shirking (not lazy) workers, and SShrk the number of shirking (lazy) workers. Suppose we had several periods of 0% inflation. Then if we had an increase in Aggregate Demand that caused an increase in the Aggregate Price level, we would see which of the following in the short run? Group of answer choices a) higher inflation and lower unemployment. b) None of the other options. c) lower inflation (which would be deflation given our premise) and higher unemployment. d) higher inflation and higher unemployment. e) lower inflation (which would be deflation given our premise) and lower unemployment.

The text proposes the following model of expected inflation x = (1 - 0) x + 0,-1 What do we know about your process of the formation of expected inflation when 0 = 07 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate. OB. Last year's inflation rate will influence you to revise your estimates for this year's expected rate. OC. Regardless of what inflation was last year, you would expect it to be at the long-run average inflation rate this year. OD. Last year's inflation rate and the long-run average inflation rate have an equal impact on your view of this year's expected rate. What do we know about your process of the formation of expected inflation when 0-17 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate OB. Last year's inflation rate will be the only input for you to revise your estimates for this year's expected rate regardless of…

The table below reports the actual inflation rate from 2016 to 2020. Complete the table, assuming people form expectations adaptively. Give all answers to two decimals, Actual inflation rate Expected inflation rate Error Year 2016 3% 3% 0% 5.50% a) % b) % 2017 6.00% 5.50% c) 2018 4.00% d) 2.00% 2019 2020 2.00% e) Look back at the table. Assuming people form expectations adaptively, which of the following statements are correct? Choose one or more: OA Monetary policy can reduce unemployment only if the policy is expected. OB. When inflation is increasing from year to year, people tend to overestimate inflation. OC. When inflation is decreasing from year to year, people tend to overestimate inflation. O D. When inflation is decreasing from year to year, people tend to underestimate inflation. OE When inflation is increasing from year to year, people tend to underestimate inflation.

Assuming prices are sticky in the short run, a decrease in useful government spending will cause inflation to __________ in the short run and growth to ___________ in the short run.       remain unchanged/decrease       increase/increase       decrease/increase       decrease/decrease       remain unchanged/remain unchanged

Assume that expected inflation is based on the following: n = 0+1. An increase in 8 will cause a. a reduction in the natural rate of unemployment. b. an increase in the natural rate of unemployment. c. inflation in period t to be more responsive to changes in unemployment in period t. d. None of the other answers is correct. e. no change in the natural rate of unemployment.

Inflation targeting consists of the Federal Reserve using monetary policy to reduce the annual inflation rate by a set amount cach year until the rate of inflation is negative using monetary policy to hold the price of a fixed basket of commodities (wheat, gold) to a 5-6 percent annual rate regularly stating an explicit goal for the rate of inflation over some future period, such as 2 percent inflation over the next two years identifying the sources of inflation and recommending structural changes in the economy that would relieve upward price pressures