Suppose the rate of inflation unexpectedly decreases from 6% to 4%. Which one of the following would most likely benefit from this unexpected reduction in the rate of inflation?
A. creditors.
B. debtors.
C. workers who are covered by a COLA agreement.
D. a borrower whose loan has a fixed nominal interest rate.
Answer: A
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
When the use of a communally owned resource has no price, then people will
A. use too much of this resource. B. use less of the resource than usual. C. use another resource altogether. D. not use this resource.
Currency includes coins and paper money in circulation and stored in the federal reserve vaults
a. True b. False Indicate whether the statement is true or false
Economic behavior is always rational
a. True b. False Indicate whether the statement is true or false