Inflation:
a. reduces the cost-of-living of the typical worker.
b. is measured by changes in the cost of a typical market basket of goods between time periods.
c. causes the purchasing power of a dollar to rise.
d. has no effect on real income.
b
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
Suppose a Treasury bond will mature in 4 years. If the bond pays a coupon of $425 per year and will make a final par value payment of $10,000 at maturity, what is its price if the relevant market interest rate is 4%?
What will be an ideal response?
When there is a surplus in a market, prices are likely to fall because:
A.) Buyers do not wish to buy as much as sellers want to sell. B.) Some buyers will offer to pay a higher price, initiating a move up the supply curve. C.) Sellers are likely to increase their production. D.) Buyers will wait for the government to establish a price floor.
In the equation of exchange, if velocity is stable in the long run,
A. %?V is a positive constant value > 0. B. %?V = infinity. C. %?V = 1. D. %?V = 0.