Suppose the central bank increases the money supply in an economy unexpectedly during a year. If the current inflation rate in this country is 3.4 percent, then according to new classical economists, the expected inflation rate for the following year would be:
a. 3.4 percent.
b. less than 3.4 percent.
c. 2.4 percent, because people form their expectations adaptively.
d. around 6.8 percent.
e. greater than 3.4 percent.
e
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Your authors say economists tend to
A) think outside the box. B) think outside the bun. C) think outside the mind. D) think outside the theory. E) think outside the facts.
The government's present value budget constraint states that
A) taxes must equal government spending in each period. B) the present value of government spending must be equal to the present value of consumers' disposable incomes. C) the present value of government spending must be equal to the present value of taxes. D) the government may run deficits each and every year, as long as the deficits are sufficiently small.
Regulatory agencies always protect consumers by forcing regulated firms to sell at the lowest possible price
a. True b. False Indicate whether the statement is true or false
The nation's stock of capital can increase only when net new investment takes place
a. True b. False Indicate whether the statement is true or false