Workers in country A have wage contracts for cost-of-living adjustments (COLAs), which adjust wages to offset the effect of inflation, and workers in country B do not. When the central banks of countries A and B increase the money supply:
Assume that workers and businesses are sensitized to inflation and are quick to raise wages and prices in response to changes in the money supply. This implies that inflation is _____ and there are _____ adjustments of wages and prices of intermediate goods.
If the monetary authorities decide to increase the nominal money supply by 10% when the economy is at its full-employment level of output, in the long run the aggregate price level increases by _____% and real GDP _____.
The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____.
Historical evidence has led economists to conclude that during periods of high inflation, the _____ model of the price level is a good approximation of reality because nominal wages and prices adjust more _____ than during periods of low inflation.
When the Treasury Department borrows from the public to finance the government's purchases of goods and services and the Fed buys the debt back from the public in the form of Treasury bills, it is known as:
Assume that the economy is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment rate even while the economy continues to contract?
Expectations of a higher inflation rate shift the short-run aggregate supply curve to the _____, changing the trade-off between inflation and unemployment. As a result, the short-run Phillips curve shifts _____.
Suppose that commodity prices across the economy begin to fall and consumers and firms begin to expect a lower rate of inflation. The SRAS curve will shift to the _____, and the short-run Phillips curve will shift _____.
Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is _____, it can be argued that _____ is/are worse off.
Expecting the inflation rate to be 3%, Adrianna decides to put her savings in bonds yielding a fixed 5% interest rate over a year. If the actual inflation rate is _____, it can be argued that _____ is/are better off.
Suppose the economy is in long-run equilibrium. The government has just decided to lower income taxes. The long-run impact of this policy will be _____ in the natural rate of unemployment and _____ in price level.
Zimbabwe's inflation problems arose mainly when its president, Robert Mugabe, seized the farmland of the white minority and turned it over to his supporters, which disrupted production and undermined the country's tax base.