If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?
What will be an ideal response?
3%
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A) whether it is anticipated or unanticipated. B) who pays it and who receives it. C) the future savings rate. D) none of the above.
Some people support the Euro in hopes that the European Central Bank will emulate the monetary policy of the central bank of
A) Germany. B) France. C) Italy. D) Spain.
Continuing with the same family from the preceding question, suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least the insurance
company would charge (in terms of vacation days)? a. 1 b. 2 c. 3 d. 4
Suppose Arf n' Barf restaurant has a monopoly on restaurant food in a certain small town. Their rent, which is one of several fixed costs they pay whether they sell food or not, has gone up. In the short run, the Arf n' Barf should
a. pay the higher rent and increase menu prices b. pay the higher rent and leave menu prices unchanged c. pay the higher rent and lower prices d. go out of business e. shut down