Comment on the ability of a credible nominal anchor to allow policy makers to exploit a short-run trade-off between unemployment and inflation
What will be an ideal response?
In the wake of a negative supply shock, policy makers may wish to implement expansionary policy to reverse the decline in economic activity. If this is understood as a temporary, "emergency" measure, rather than an abandonment of a commitment to price stability, expected inflation may decline even as aggregate demand is rising. However, under normal circumstances, any attempt to reduce unemployment and tolerate an increase in inflation will not be supported by credibility. On the contrary, such a policy must signal a lack of commitment to price stability; the loss of credibility confirms the illusory nature of the trade-off.
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Matt's real wage in 2014 is $26.80. If the price level is 104, what is Matt's nominal wage?
A) $30.80 B) $27.87 C) $26.80 D) $25.77
A "tight" money, easy "fiscal" policy combination will be preferred by society which values
A) low growth rates, but more goods and services in the future. B) public goods today greater than private goods in the future. C) private goods today more than public goods in the future. D) public and private goods in the future more than public and private goods today.
If Angelo's Pizza Restaurant has a constant marginal cost of $50 for each additional table in the restaurant and a constant marginal cost of $12 for operating each additional table, what is Angelo's long-run marginal cost per table?
A) $38 B) $62 C) $12 D) $50
Which of the following is true if the opportunity cost of producing a particular good is less than its accounting profit?
a. Economic profit is zero. b. Economic profit is negative. c. Economic profit is positive. d. Economic profit cannot be determined.