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 O d. An increase in AD and a decrease in SRAS O e. A decrease in AD and a decrease in SRAS
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- 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-1The short-run aggregate supply curve has: O A. a positive slope because as the inflation rate increases, so does the quantity of output supplied. OB. a positive slope because as the inflation rate increases, the quantity of output supplied decreases. C. a negative siope because as the inflation rate increases, the quantity of output supplied decreases. O D. a negative slope because as the inflation rate increases, so does the quantity of output supplied.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
- 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 deflationTime left 2:2902 Which of the following provides the best explanation for the following: An economy experiencing an expansion due to a surge in aggregate demand, experiences inflation measured by O a. Unexpected inflation: GDP deflator O b. Expected inflation; GDP deflator Oc Unexpected inflation; CPI O d. Expected inflation; CPI Oe. None of the above is correctEconomists use the term inflation to describe a situation in which Select one: O a. the economy's overall price level is rising. O b. some prices are rising faster than others. O c. the economy's overall price level is high, but not necessarily rising. O d. the economy's overall output of goods and services is rising faster than the economy's overall price level.
- Refer to the information provided in the figure at right to answer the question that follows. The level of aggregate output that can be sustained in the long run without inflation O A. is $400 million. B. is $700 million. O C. is $800 million. O D. cannot be determined from this information because aggregate demand is not given. Price level, P LRAS AS :800 400 700 Aggregate output (income), Y ($ million)If the NAIRU was 10% and the actual unemployment rate was 9%, we would conclude that O A. the expectational and output-gap effects would both likely mean no change in nominal wages. O B. the sticky wages would mean no decrease in nominal wages. O C. there would be no output-gap effect because unemployment was very high. D. the unemployment rate would have to fall further before the expectational effect would influence wage changes. O E. the output-gap effect would work to increase nominal wages for workers.The phrase that inflation is a "monetary phenomenon" means... O a. Increases in the price level are always associated with increases in the money supply. O b. Only an increase in the money supply can start a period of inflation. Oc A continuous rise in prices is possible only with C. continuing increases in the money supply. O d. Repeated supply shocks cannot drive up prices if there is no monetary validation. O e The price level cannot rise without an increase in the money supply.
- QUESTION 5Which of the following best describes inflation?O a. Economic growth.O b. An increase only in the price of energy.O c. An increase in the overall price level in an economy.O d. Ballooning debt.Figure: Aggregate Demand) Point B on this aggregate demand curve represents an inflation rate of: O A. 3% O B. 4% O C. 5%. O D. 7%Suppose the inflation rate Tt rises and the central bank raises the nominal interest rate. This result will be shown by a(n) the AE curve and a(n) the ADTT curve. O a. Downward movement along; upward shift in O b. Upward shift in; upward movement along O c. Upward shift in; upward shift in O d. Downward shift in; upward movement along