Does the description of inertial inflation rely more on economic or political factors? Explain
What will be an ideal response?
The economic issue has to do with loss of purchasing power by groups most hurt by inflation, while the degree of success met with by groups trying to maintain their purchasing power is more a political issue. Students should recognize that there is no clear dividing line, however.
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One way of expressing the concept of the short-run Phillips curve is to say that: a. the cost of reducing unemployment is higher inflation
b. nothing but good comes from reducing unemployment. c. the cost of reducing inflation is lower unemployment. d. aggregate supply and aggregate demand will always be equal at the potential output level. e. the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment.
Which of the following is the best example of "creative destruction"?
a. The imprudent use of a credit card by a family that already has a high level of debt. b. The virtual elimination of the film camera by the digital camera. c. The failure of a business because of poor management. d. The failure of a business because of higher cost resulting from government regulation.
The government finances the budget deficit by
a. borrowing from the public. b. borrowing solely from the Federal Reserve Bank. c. printing currency in the amount of the budget deficit. d. requiring that budget surpluses occur every other year to pay off the deficits.
The ________ was created as a part of the Bretton Woods agreement.
A. Federal Reserve Bank B. International Monetary Fund C. Bureau de Change D. World Bank