Explain how inflation is sometimes beneficial to the society
Although the economic effects of inflation are primarily negative, two countervailing points are worth noting. First, the effect of inflation will differ considerably according to whether it is creeping up slowly at 0–2 percent per year, galloping along at 10–20 percent per year, or racing to the point of hyperinflation at, say, 40 percent per month. Hyperinflation can rip an economy and a society apart, but an annual inflation rate of 2 percent or 3 percent or 4 percent is a long way from a national crisis. Second, it is sometimes argued that moderate inflation may help the economy by making wages in labor markets more flexible. (Elaborate a little; nominal wages tend toward downward rigidity, but gradual inflation "nips" at nominal wages, causing gradual declines in some real wages that are desirable from an economics perspective.)
You might also like to view...
An individual or country that has a comparative advantage in the production of one good
A) may or may not have an absolute advantage in the good's production. B) must have an absolute advantage in the good's production. C) must not have an absolute advantage in the good's production. D) must not have an absolute advantage in the production of the other good.
The four parts of the business cycle occur in the following order
A) recession, trough, peak, expansion. B) expansion, trough, peak, recession. C) recession, trough, expansion, peak. D) expansion, trough, recession, peak.
From a macroeconomic perspective, a payment made by a foreign firm to a U.S. investor looks just like an:
a. import of a service b. import of a good c. export of a service d. export of a good
Answer the following statements true (T) or false (F)
1 . U.S. gross domestic product (GDP) measures the market value of all goods and services produced by Americans in one year. 2. A product that was produced in 2013 and not sold until 2014 is counted as part of GDP in 2013. 3. The value added in an industry includes the wages earned by workers in the industry. 4. The value of a sale of a share of stock is considered to be an investment in national income accounting. 5.Gross private domestic investment can be divided into replacement investment and net investment.