In new Keynesian theory, the pattern of inflation exhibited by an economy with growing aggregate demand known as inflation dynamics is
A. initially speedy upward adjustment of the price level and inflation in response to higher aggregate demand followed by lower inflation in the future.
B. initially sluggish downward adjustment of the price level and inflation in response to higher aggregate demand followed by lower inflation in the future.
C. initially sluggish upward adjustment of the price level and inflation in response to higher aggregate demand followed by higher inflation in the future.
D. initially speedy upward adjustment of the price level and inflation in response to higher aggregate demand followed by higher inflation in the future.
Answer: C
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Everything else held constant, a monetary expansion is characterized by ________ output and ________ interest rates
A) rising; rising B) rising; falling C) falling; rising D) falling; falling
Macland is running a budget deficit and has issued new treasury bonds. Foreign investors are eager to buy the newly issued bonds but to do so must have Macland currency. What effect does this budget deficit have on the value of Macland’s currency?
a. The exchange rate will not change. b. The exchange rate will depreciate. c. The exchange rate will appreciate. d. The exchange rate will decrease.
Both the crowding-out effect and new classical model indicate that
a. expansionary fiscal policy is a highly effective weapon with which to fight an economic downturn. b. restrictive fiscal policy is a highly effective weapon with which to control inflation caused by excess demand. c. there are side effects of budget deficits that will substantially, if not entirely, offset their expansionary impact on aggregate demand. d. fiscal policy can be used effectively to restrain inflation but it is largely ineffective as a weapon against recession.
A movie star was paid $1 million in 1960 to do a movie. The CPI was 29.3 in 1960 and the CPI in 2014 was 240. Approximately how much did the movie star earn in 2014 dollars?
A) $0.87 million B) $8.66 million C) $6.44 million D) $7.74 million E) ?$8.19 million