Suppose the price level spiked unexpectedly, resulting in unanticipated hyperinflation. How would this affect you personally? Explain how you would have planned differently if you knew the spike in price level was coming.
What will be an ideal response?
Answers to this question will vary but should exhibit an understanding of how
consumers behave differently when inflation is expected versus not expected. For
example, students might point out that unanticipated hyperinflation would make the food
they eat very expensive. They might explain that if they had known the hyperinflation was coming, they would have stocked up on nonperishable foods in order to avoid
reduced purchasing power in the future.
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In an industry with a large number of firms,
A) each firm will produce a large quantity, relative to market demand. B) one firm will dominate the market. C) collusion is impossible. D) competition is eliminated. E) barriers to exit must exist.
Compared to Treasury bills, commercial paper
A) has no default risk. B) does not have much of a secondary market. C) has a lower yield. D) sells at a higher price for.
A country with plenty of capital and little land may have a comparative advantage in:
A. land-intensive activities. B. capital-intensive activities. C. labor-intensive activities. D. technology-intensive activities.
Marginal physical product is
A. the increase in input usage resulting from an increase in revenue. B. the same as marginal revenue product. C. equal to average physical product when a monopoly firm is in equilibrium. D. the increase in output stemming from a one-unit increase in input.