Unanticipated inflation always benefits somebody, so the overall cost cannot be higher than it is for anticipated inflation. Comment
What will be an ideal response?
It is true that mistaken expectations of inflation cause one party to a transaction to get a better deal than intended, at the expense of the other party. But the true value of that better deal is reduced by the fact that neither party knows, in advance, who will win. Few workers, for example, would prefer to be paid on the basis of a lottery in which losing is as likely as winning. Moreover, unanticipated inflation is difficult to recognize, even after the fact. If the size of your nominal wage increase exceeds your expectation of inflation, does that mean your real wage is higher, or that your expectation was mistaken? By the time you figure it out, you may have made a wrong decision.
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According to this Application, from the early 1990s until quite recently, the U.S. economy grew. This growth in the U.S economy
A) decreased foreign investment in the U.S. B) decreased imports to the United States. C) caused the level of U.S. exports to decline. D) increased the U.S. demand for foreign products.
An increase in the price of labor used to produce good Y will lead to
A) an increase in the market clearing price of good Y. B) an increase in the supply of good Y. C) a decrease in the demand for good Y. D) an increase in the demand for good Y.
The price charged by a monopolist is socially inefficient because the price
A) exceeds the true marginal cost of the resources used. B) is less than the opportunity cost of the resources used. C) puts the monopolist into a higher tax bracket. D) is too low.
Which of these is an advantage of money as a store of value? a. It can generate high interest income
b. It can facilitate hassle-free international exchange. c. It can be easily liquidated. d. It can signal a nation's economic health. e. It can increase potential output.