Describe how inflation can be costly even if it is anticipated
What will be an ideal response?
First, there will be redistribution as some incomes fall behind even an anticipated level of inflation. Second, firms and individuals must hold money to perform transactions. Those holding money lose purchasing power at a rate equal to inflation. Third, firms must pay individuals to change prices. These costs, called menu costs, can be substantial at very high levels of inflation. Fourth, investors have to pay higher taxes on interest and capital gains income as the government taxes nominal interest and capital gains income. Investors then lose real after-tax income.
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The items included in the CPI are
A) final goods produced in the United States. B) final goods and services produced in the United States. C) goods and services consumed by the typical urban household. D) only goods and services produced within the current year and consumed by the typical household. E) goods but not services consumed by the typical urban household.
Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve represents average total cost?
A) Any of the 3 could be ATC. B) Curve 1 C) Curve 2 D) Curve 3
Collusion among firms to form a cartel refers to
a. joint ventures in producing new goods, such as France and England colluding to produce the European Airbus as a viable competitor to the U.S. Boeing's 747 b. joint ventures between business and government, such as the exploration of space c. joint ventures between a domestic firm and a foreign firm, such as in the mega-movies of the entertainment world d. the practice among firms of preventing other firms from entering the industry e. the practice among firms of agreeing to abide by the group decision on price and output
Who made the campaign pledge, "Read my lips: no new taxes?"
A. Gerald Ford B. Second President Bush C. Ronald Reagan D. First President Bush