For most people, the problems of inflation are caused by the fact that
A. the inflation rate causes the purchasing power of money to increase.
B. all prices change so there is no way to protect themselves against the decline in their wealth.
C. the inflation is anticipated.
D. the inflation is unanticipated.
Answer: D
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What is the error in the following argument? "An increased sales tax on gasoline won't reduce consumption, because while the higher price will at first reduce demand, the reduced demand will eventually bring the price back down again, and consumption
will return to its former level." A) A higher price doesn't reduce demand. B) A reduced demand does not cause lower prices. C) The tax-induced price increase may be greater than the price reduction due to the lower demand. D) the tax-induced price increase will necessarily be greater than the price reduction due to the lower demand, because demand is never perfectly inelastic. E) The ultimate effect on consumption may be to increase it beyond its original level.
A demand shock that increases real GDP above its full-employment level will, in the long run,
a. lead to a higher wage rate and an upward shift of the aggregate supply curve b. lead to a lower wage rate and a downward shift of the aggregate supply curve c. lead to a higher wage rate and a rightward shift of the aggregate demand curve d. lead to a lower wage rate and a leftward shift of the aggregate demand curve e. cause no further shifts in the aggregate supply or aggregate demand curve
If the price of a good is below the equilibrium price,
a. suppliers will find inventories building; they will cut output and raise prices. b. suppliers will find inventories being depleted. They will increase production and raise prices. c. the demand curve will shift down until an equilibrium is established at the existing price. d. the supply curve will shift up until an equilibrium is established at the existing price.
When the supply of a good is represented by a horizontal line, the burden of a tax is: a. shared equally between the buyers and the sellers. b. placed entirely on the buyers
c. placed entirely on the sellers. d. more on the buyers than on the sellers.