Workers and firms are currently expecting the price level to increase from 110 to 114. The Federal Reserve then announces that it will be reducing the growth rate of the money supply
If the Fed's announcement is credible, and firms and workers have rational expectations, describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.
Workers and firms were expecting an inflation rate of 3.6%, but when the Fed announces it will be reducing the money supply, workers and firms rationally expect this will reduce inflation. Based on the expectation that inflation will fall, workers are willing to accept lower nominal wages and firms will pay lower nominal wages so that the real wage is unchanged. If the real wage is unchanged, the level of employment remains the same, and there is no impact on the unemployment rate.
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The above table shows Homer's marginal utility from consuming various quantities of chocolate chip cookies and cake. The price of cookies is $2 per pound, the price of cake is $2 per slice and Homer has $18 to spend on cookies and cake
Homer will consume ________ pounds of cookies and ________ slices of cake. A) 5; 4 B) 4; 5 C) 6; 3 D) None of the above answers is correct.
Under perfect competition, the equilibrium price of labor used to produce cloth will be equal to
A) the marginal product of labor in the production of cloth times the price of cloth. B) the average product of labor in the production of cloth times the price of cloth. C) the ratio of the marginal product of labor in the production of cloth to the marginal product of labor in the production of food times the ratio of the price of cloth. to the price of food. D) the slope of the production possibility frontier. E) the price of cloth divided by the marginal product of labor in the production of cloth.
Which of the following is true?
a. The stock market provides investors with an opportunity to own a fractional share of the firm's future profits. b. A new stock issue is often an excellent way for a firm to raise funds for future expansion. c. Changes in stock prices provide information about what investors think of various business decisions. d. All of the above are true.
The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?
a. 8 percent b. 15 percent c. 2 percent d. 1.7 percent