What are the costs associated with inflation?
What will be an ideal response?
Inflation can redistribute income between those who can raise their prices and wages and those who are unable to do so. Individuals on fixed incomes from pensions or investments will be worse off if these sources of income do not increase with the inflation rate. Borrowers gain and lenders lose with inflation because the payments on loans such as home mortgages, may not increase with inflation. Inflation results in uncertainty about what the real purchasing power of money will be in the future. Inflation also creates difficulties in contracts for future payments, and high inflation may undermine the faith in governments and economic systems entirely.
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Of the following, the largest single component of U.S. federal government expenditures is spent on
A) transfers to state and local governments. B) Medicare and Medicaid. C) interest paid on the national debt. D) purchases of goods and services for purposes other than national defense. E) national defense.
In the prisoners' dilemma game, each player
A) has only one possible strategy. B) can choose from two strategies. C) can choose from three strategies. D) can choose from four strategies.
The economist who won the Nobel Prize in Economics for his path-breaking analysis of the ways in which property rights, transaction costs and institutions affect the allocation of economic resources is:
A. John Nash. B. Arthur Cecil Pigou. C. Ronald Coase. D. Theodore Groves.
The oligopoly market structure model is characterized by:
a. many firms in an industry producing differentiated products. b. many firms in an industry producing identical products. c. few firms in an industry with natural barriers to entry. d. a single firm in an industry with barriers to entry. e. many firms in an industry with barriers to entry.