If firms and households form their expectations about inflation by looking at past inflation, this form of expectations formation is known as ________ expectations
A) adaptive
B) forward-looking
C) rational
D) perfect
A
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Refer to Figure 13-11. What is the amount of excess capacity?
A) Q3 - Q2 units B) Q3 - Q1 units C) Q4 - Q2 units D) Q4 - Q3 units
The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers
A) had adaptive expectations. B) had rational expectations and that they trusted Fed announcements. C) preferred high unemployment to high inflation. D) Both A and B are correct answers.
A bottle of wine manufactured in Paris, France cost 45 euros. What is the dollar value of the wine if the exchange rate is $0.80 per euro?
A) $36.00 B) $56.25 C) $40.00 D) None of these dollar values is correct.
Other things being equal, if you took money out of your demand deposit account and put it in a savings deposit account:
a. M1 would increase and M2 would increase. b. M1 would increase but M2 would not change. c. M1 would decrease and M2 would decrease. d. M1 would fall but M2 would not change.