Inflation due to an increase in aggregate supply is called cost-push inflation.
Answer the following statement true (T) or false (F)
False
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Which of the following demand functions represents a price elasticity of demand equal to -0.33 and an income elasticity of demand equal to 0.8 at all points along the curve?
A) Q = 3 - 0.33P + 0.8I B) Q = 4.5 - 0.33 log(P) + 0.8I C) log(Q) = 1.34 - 0.33 log(P) + 0.8I D) log(Q) = 2.34 - 0.33 log(P) + 0.8 log(I)
Jim is haggling with a car dealer on the price of a used car. During the bargaining, Jim discovers that the car has a significant number of scratches which he had not noticed before. The total surplus from the sale has
a. Increased b. Decreased c. Was not affected d. All of the above
Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is
A. inelastic. B. perfectly inelastic. C. unit elastic. D. elastic.
Which of the following is not an argument against inflation targeting?
A) Inflation targeting reduces the flexibility of the Fed to pursue other policy goals. B) Inflation targeting assumes that the Fed can accurately forecast future inflation rates. C) Inflation targeting makes monetary policy ineffective because the targets are publicly announced. D) Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals.