Compared to the fixed-price/fixed-wage model, in the Keynesian model with a flexible price but fixed wage, an increase in the money stock will cause output to rise by
a. less while the interest rate will fall by more.
b. less and the interest rate to fall by less.
c. more but the interest rate to fall by less.
d. more and the interest rate to fall by more.
B
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Inflation ________ the cost of holding money and ________ the after-tax real interest rate
A) decreases; increases B) increases; decreases C) increases; increases D) decreases; decreases E) increases; does not change
Inflation reduces the multiplier effect by reducing consumers’ wealth and purchasing power.
Answer the following statement true (T) or false (F)
In the ___________, total production keeps growing, but by smaller and smaller amounts.
Fill in the blank(s) with the appropriate word(s).
Expected inflation is
A. anticipating inflation over 2% from year to year. B. based on inflation-adjusted averages year to year. C. the opposite of disinflation. D. the amount of inflation that households and businesses expect will continue into the future.