Suppose there's an unanticipated increase in the rate of inflation. Which of the following is likely to be true?
a. Workers whose nominal wages are set at the beginning of the year are likely to suffer a decrease in real wages.
b. Creditors who made loans based on the anticipated rate of inflation will earn a higher real interest rate than they expected.
c. The real value of outstanding loan balances of debtors will increase.
d. Workers whose nominal wages are set at the beginning of the year are likely to enjoy an increase in real wages.
a. Workers whose nominal wages are set at the beginning of the year are likely to suffer a decrease in real wages.
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This year Gus purchased a used 1972 vehicle from Wee-Rob-U Auto Sales. The dealer paid $500 for it yesterday, and sold it to Gus for $3500. In principle, what happens to GDP?
A) Nothing, because the vehicle was already accounted for in 1972. B) Nothing, because Gus was ripped off. C) It increases by $3000. D) It increases by $3,500. E) It increases by $6,500.
Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $10 . Athos values a fencing lesson at $15, Porthos at $13, and Aramis at $11 . Suppose that if the government taxes fencing lessons at 50 cents each, the price rises to $10.50 . A consequence of the tax is that consumer surplus shrinks by
a. $1.50 and tax revenues increase by $1.50, so there is no deadweight loss. b. $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50. c. $7.50 and tax revenues increase by $7.50, so there is no deadweight loss. d. $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6.
The base year is the year
A) in which prices are unstable. B) in which prices are lowest. C) in which prices are highest. D) that serves as a reference point or benchmark. E) in which nominal output is largest.
The Federal Trade Commission Act was designed to
A. prohibit cutthroat pricing. B. prohibit bundling. C. protect domestic companies from foreign competition. D. increase foreign trade.