Assume that during the last several years, the annual rate of inflation was 4 percent and the annual growth rate of the money supply was 5 percent. During the last 12 months, however, the monetary authorities have increased the money supply at a 12 percent annual rate. The expected inflation rate for the next period will be
a. higher than 4 percent under the rational expectations hypothesis.
b. 4 percent under the adaptive expectations hypothesis.
c. higher than 4 percent under both the adaptive and rational expectations hypotheses.
d. both a and b.
D
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Prejudice leads, inevitably, to economic discrimination.
Answer the following statement true (T) or false (F)
If the MPC is 0.9 and the tax rate is 15%, a $100 increase in autonomous investment will increase equilibrium income by
A) $131. B) $426. C) $599. D) $850.
The price of the typical cell phone has been going down in the past 10 years. What could explain this consistent drop in the price of these phones? Use the model for the long-run competitive firm to illustrate your answer (hint: you need two diagrams here: one showing the LAC for the typical firm, and another showing the long-run supply curve for the industry).One explanation is that the market for cell phones is a pecuniary economy, due to economies of scale. If that is the case, the diagram to represent the LAC for this market is given below.
What will be an ideal response?
A firm that discriminates against black labor will certainly
A. hire no workers. B. hire all black workers. C. earn less profit than it could earn if it did not discriminate. D. hire all white workers. E. hire a mix of black and white workers.