If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer
Unemployment falls. The decrease in expected inflation shifts the short-run Phillips curve to the left. This means that at any given inflation rate, the unemployment rate is lower.
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Assume a firm is able to use an optimal two-part tariff
a. Is the outcome economically efficient? Why or why not? b. What happens to consumer surplus? c. Does this represent perfect price discrimination? Why or why not? What will be an ideal response?
Suppose the United States' production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis. We now learn that the German mark sharply depreciates against the U.S. dollar. We now know that
A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) the United States has a comparative advantage in butter. D) Germany has a comparative advantage in widgets. E) Germany has lost its comparative advantage.
Market equilibrium occurs when:
What will be an ideal response?
If you feel you are better off because you receive a 5 percent raise even when the price level also increases by 5 percent, then you are a victim of the
A. money illusion. B. money income effect. C. purchasing power effect. D. real income effect.