What evidence does the Volcker disinflation provide concerning the importance of inflation expectations to the costs of disinflation?
Unemployment did rise. However, the sacrifice ratio was lower than many had expected, possibly because Volcker's tough stand on inflation reduced inflation expectations.
Although inflation expectations fell, they did not fall as fast as actual inflation. If they had, unemployment would have risen by less and the cost of the disinflation would have been lower.
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Use the figure below to answer the following question.
The diagram shows three supply curves for apples today. Which of the following would cause the current supply of apples to shift from S1 to S3?
A. an increase in the number of corn farmers B. expectations of lower apple prices in the future C. a decrease in the price of apples in the market D. expectations of higher apple prices in the future
Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?
a. The GDP Price Index and current international transactions remain the same. b. The GDP Price Index falls, and current international transactions become more negative (or less positive). c. The GDP Price Index rises, and current international transactions becomes more negative (or less positive). d. The GDP Price Index rises, and current international transactions remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) perfect competition (ii) monopolistic competition (iii) monopoly
a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i), (ii), and (iii)
In the market for money, the price is
A. the interest rate. B. the wage rate. C. the premium. D. the exchange rate.