What is inflation bias? What measures have governments taken to avoid it?
What will be an ideal response?
Inflation bias is caused when a government is expected to use policy tools to create an economic expansion (such as before an election). Because it is expected, wages and therefore prices are increased. If the government did not pursue the expansionary policy then, there would be a recession! Inflation is increased without the advantage of an increase in output.
Making the central bank independent of the political government is one answer to avoid inflation bias.
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In the Keynesian view,
a. both monetary and fiscal policy can affect income. b. monetary policy can be ineffective when money demand is less interest rate elastic. c. fiscal policy is a more reliable way to stimulate output during a recession. d. all of the above
Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?
a. the cost of mustard b. the cost of hotdog buns c. wages paid to workers who sell hot dogs d. the cost of bookkeeping services
Exhibit 10-3 Aggregate supply and demand curves
In Exhibit 10-3, the change in equilibrium from E1 to E2 represents:
A. deflation. B. demand-pull inflation. C. price-push inflation. D. cost-push inflation.
Her marginal utility of her fifth pack of trading cards would be
Demand and Utility Schedules for Packs of Star Wars Trading Cards
A. $40.
B. $34.
C. $30.
D. $6.