How does unanticipated deflation affect incomes, debts, and savings?
What will be an ideal response?
Deflation is a general decline in the price level. People with fixed incomes will find that the real value of their incomes will rise (a dollar will buy more goods and services than it did previously). People with debts will find that they have to pay back more in real terms than the nominal value of their debts. Savers will benefit because the real value of their savings will increase.
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If the reserve ratio is 4 percent, then the money multiplier is
A. 25 B. 20 C. 4 D. None of the above is correct.
If labor is 80 percent of total costs in industry A and 20 percent in industry B, then other things equal, we would expect the elasticity of demand for labor to be
A) greater in industry A than in industry B. B) greater in industry B than in industry A. C) the same in both industries. D) uncertain since no general relationship exists between cost shares and elasticities.
Refer to the figure. Consumer surplus before the $4 tax is ________, and consumer surplus after the $4 tax is ________.
Fill in the blank(s) with the appropriate word(s).
The PIH and LCH theories ________ the case for activism, while the procyclical behavior of consumer spending for durable goods ________ the case for activism
A) supports; supports B) supports; does not support C) do not support; does not support D) do not support; supports