Which of the following is not an example of inflation causing a redistribution of income because the inflation was unexpected?
A) Firms have to hire extra workers to change prices because of inflation.
B) A firm signs a 4-year contract with a union based on a 3% expected rate of inflation per year, and the actual inflation rate ends up being 5% per year.
C) An employee receives an increase in salary that is less than the rate of inflation because management under-predicted inflation.
D) A bank collects a lower amount of interest from a loan because inflation was predicted to be 2% but was actually 4%.
A
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When the Fed purchases government securities from a commercial bank, the bank: a. automatically becomes poorer
b. loses equity in the Fed. c. receives reserves that can be used to make additional loans. d. loses its ability to make loans.
The decreasing portion of a firm's long run average cost curve is attributable to:
a. economies of scale. b. diseconomies of scale. c. increasing marginal cost. d. constant returns to scale.
Deflation occurs when
A. the unemployment rate declines. B. economic activity declines. C. the economic growth rate declines. D. there is a decrease in the overall price level.
Suppose you live in the suburbs and dump your garbage on your front lawn on a daily basis.
A. Your actions hurt no one but yourself. B. Your actions constitute an external cost to your neighbors. C. Your actions constitute an external benefit to your neighbors. D. Your actions would not be considered a market failure.