Inflation can cause a misallocation of resources because
A. firms have to change their price labels at unusual times.
B. the nominal rate of inflation doesn't equal the real rate of inflation.
C. people are encouraged to borrow too much.
D. inflation doesn't proceed evenly which means that people have a difficult time determining when a price change signals a change in relative prices.
Answer: D
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Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
Excess demand or excess supply will always drive price back to equilibrium in a free market
Indicate whether the statement is true or false
A firm purchases $400,000 worth of raw materials and pays wages and salaries of $300,000 and dividends of $100,000 . If the firm sells its output for $1 million, the firm's value added to GDP is
a. $400,000. b. $600,000. c. $800,000. d. $1,000,000.
Which of the following are excluded from GDP?
A. changes in the value of existing assets B. financial transactions C. sales of used goods D. All of the choices are excluded from GDP.