If the Fed increases the inflation rate in the short run before people's expected inflation changes, what occurs? What happens in the long run?
What will be an ideal response?
Increasing the inflation rate with no change in the expected inflation rate moves the economy along its short-run Phillips curve. The inflation rate rises and the unemployment rate falls. The short-run Phillips curve does not shift. In the long run, however, people will revise their expected inflation rate upward to match the higher inflation. As this revision occurs, the short-run Phillips curve shifts upward. The unemployment rate and the inflation rate both increase. In the long run, when the higher inflation rate is fully expected, the short-run Phillips curve stops shifting upward. At this point, the unemployment rate has risen from its initial fall so that it now equals the natural unemployment rate. The inflation rate is permanently higher.
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What is happening in this perfectly competitive firm if the market price is P3?
a. In the short run and the long run the firm only makes positive accounting profits. b. In the short run and the long run firms will have normal profits c. In the short run the firm will make normal profits and in the long run the firm will make positive economic profits d. In the short run the firm will make positive economic profits but in the long run the firm will have negative economic profits. e. In the short run firms will have positive economic profit but in the long run firms will enter the market and drive profits back to normal
A perfectly competitive firm is making an economic profit when
A) its total revenue is greater than its total cost. B) the price is greater than the minimum of its average total cost. C) the price is greater than the minimum of its average variable cost. D) Both answers A and B are correct.
The organization that settles trade disputes between countries is the
A) World Bank. B) World Trade Organization. C) International Monetary Fund. D) United Nations.
The government sector sells resource services to households and buys goods and services from firms
a. True b. False Indicate whether the statement is true or false