During a period of high inflation:
A. borrowers are better off because they can pay off their loans with currency that is worth less.
B. borrowers are worse off because they have to pay off their loans with currency that is worth more.
C. lenders are worse off because they cannot find anyone who wants a loan.
D. lenders are worse off because they are repaid with currency that is worth more.
E. none of the above.
Ans: A. borrowers are better off because they can pay off their loans with currency that is worth less.
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Gordon believes that the new Keynesian approach as opposed to other business cycle theories is preferred because
A) it explains information barriers and sticky wages. B) it explains how workers are "fooled." C) it explains wage and price stickiness assuming rational firms and workers. D) it identifies the source of supply side shocks and slow SAS adjustment.
If a firm stops production, then its:
A. variable costs decrease to zero. B. total costs decrease. C. fixed costs stay the same. D. All of these are true.
Taylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20.MoviesPer MonthMarginal UtilityPer MovieDinners OutPer MonthMarginal UtilityPer Dinner160115025021403203120454100 Taylor's optimal combination of movies and eating out is:
A. 3 movies and 3 dinners. B. 4 movies and 3 dinners. C. 2 movies and 4 dinners. D. 3 movies and 4 dinners.
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower