Join now. Log in. For a limited time, find answers and explanations to over 1.2 million textbook exercises for FREE! pensioners, students) will be worse off in real terms due to higher prices and equal income as before; this will lead to a reduction in the purchasing power of their income. greg, a 19 year old African american male. *correct: -The economy is weak. Cost-push inflation is a result of a decrease in aggregate supply. The U.S. unemployment rate of (1) adult workers is consistently higher than that of (2) adult workers, and the labor force participation rate is consistently higher for (3) adult workers than for (4) adult workers. Not employed and not currently searching for jobs = 6,000,000 An increase in payroll taxes leading to an increase in aggregate demand. (higher wages may also contribute to rising demand) 2. But the situation of monetary expansion or budget deficit may not cause price level to rise. Total relevant population = 50,000,000 This is the most obvious impact to businesses. Gwyn owns a furniture store. Which of the following groups would be not be counted as unemployed when calculating the unemployment rate? Cost-push inflation can be caused by many different factors, like, as seen in the previous example, by a supply shock, which is probably the most common cause of cost-push inflation… Industrial Policy and the Expansion of the Scope of the Private Sector 2. How do non-market goods cause inaccuracies in measuring the productivity of a nation? In trying to understand the universe, two major problems remained: the flatness problem and the horizon problem. Increase in Money Supply: Inflation is caused by an increase in the supply of money which leads […] Thirty years ago Daniel bought a plot of land for $50,000 when the CPI was 50. year:2007 Nominal GDP growth rate:9 price level growth rate:6. 1-You repair your own pants when your rip them. Many governments have set their central banks a target for a low but positive rate of inflation.They believe that persistently high inflation can have damaging economic and social consequences.. Income redistribution: One risk of higher inflation is that it has a regressive effect on lower-income families and older people in society. Which of the following scenarios would lead to an increase in the price level (i.e., a short-run inflation)? T/F. 2-Unemployment is above the natural rate. Now the government decided to increase the growth rate to attract more investments from foreign as well as local investors. Almost everyone is sure that he knows what inflation exactly is, but it remains a source of great deal of confu­sion because it is difficult to define it unam­biguously. Inflation can affect the distribution of income because people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power. higher: -turkey -mexico -India lower: -Nicaragua. Marshall has recently lost his job and is currently receiving federal jobless benefits. Or inflation is attributed to budget deficit financing. Each inflationary measure takes a "basket" of g… What is the main advantage of the Billion Prices Project over the CPI? which of the following best defines inflation -It is not possible to accurately measure the size of the underground economy. Drag the labels to the appropriate country. ***real higher: -The cost of living in the new city is 8% higher, and you’d get a raise of 10%. Increases in short-run aggregate supply. Following two consecutive quarters of contraction, UK gross domestic product (GDP) is estimated to have grown by a record 15.5% in Quarter 3 (July to Sept) 2020. In many places in economics, "real" variables need to be compared, in order to calculate GDP, effective interest rate and improvements in productivity. An increase in oil prices that leads to a reduction in aggregate demand. 3-Unregulated industries pollute the air. Which statement is not true of full employment output (Y*)? Let us have a look at your work and suggest how to improve it! However, GDP does not take into account many factors that affect quality of life, like the amount of people’s (1) or the cleanliness of the 920. If trades unions can present a united front then they can bargain for higher wages. What problems could inflation cause for Gwyn? Take 2014 as the price index base year. Now that we have covered the basics of inflation, it is important to note that there are many types of inflation. -GDP rose in the recent past. Prices begin to rise, so firms increase output. Which of the following products would count toward GDP? Factors Affecting Demand: Both Keynesians and monetarists believe that inflation is caused by increase in aggregate demand. T/F. GPD changes by –1%, what is the change in the velocity of money? 2-A new smartphone app solves math problems simply by pointing the camera at the page. Given that people and companies would like to fully understand how their wages, assets, and debt evolve over time, the fact that inflation makes it more difficult to do so can be viewed as yet another cost of inflation. Counted in GDP: -a new bicycle sold by a bike shop -bicycle handlebars sold to consumers as a customization item Not counted in GDP: -a used bicycle sold at a garage sale -bicycle handlebars sold to a bike manufacturer. The workers worry they agreed to lower wages than they should have. Assuming that the increase reflects the inflation rate and that this rate continues in 2016, match each number to its description. (a) A list of factors that can cause an increase in demand from D 0 to D 1. Too much inflation can cause the same problems as low inflation. Answer to Problem 1SCQ Inflation is the persistent increase in general price level over a period of time in an economy. What best describes why inflation occurs? 2-Your mom made a sweater for you for your birthday. Now the CPI is 180 and he sold the land for $180,000. GDP only measures a country’s economic (3). The government decides to expand its monetary policyby reducing the interest rates (repo rate) making credit cheaper for common people. A country has a noninstitutionalized population of 243 million people. If left unchecked, inflation could spike, which would likely cause the economy to slow down quickly and unemployment to increase. For one thing, a (1) country may have a low GDP but a high (2). What are the three reasons why the CPI is hard to measure accurately? Calculate how much your parents’ car would have cost if they bought it today. Identify each good as either intermediate or final. advances in tech typically cause the price of some goods to decrease over time, Match the situation to the factor that affects the accuracy of the CPI. 3-the 2015 price index Suppose the consumer price index for one year was 120 and for the next year it was 132. Classify each concept as microeconomic or macroeconomic. Even if prices and wages are flexible enough to adjust well for inflation, inflation still makes comparisons of monetary quantities across years more difficult than they could be. -measuring living standards Which of the following are examples of investment? (Dr. - 1)i. related to the dead ii. If you're interested in further exploring the topic of inflation, take a look at Effects of Inflation on Suppliers and Demanders. **incorrect: -Country A has a high real GDP. Suppose there is uncertainty about the amount of inflation that will occur during the “Produce” period, between the signing of contracts and the collection of sales revenue. Information technology (IT) projects are notorious for failing to meet stakeholder expectations. 2-Country A has a very high GDP, but the average person works 60 hours a week. It applies (3). 1-uncertainty about future price levels 2-wealth redistribution 3-price confusion. Some also count built-in inflation as a third cause. & Unemployment equals the natural rate. If maintaining at least the same real wage is your only concern, select all the cities to which you could relocate. Causes of Inflation There are several reasons as to why an economy can experience inflation. 2-Actual GDP is below potential GDP. ***Included: -recently laid-off workers who are searching for new jobs ***Not included: -retired workers -recently laid-off workers who are not searching for jobs -a 15-year old student searching for his first job -employed workers who want to work more hours. Rapidly rising prices will cause consumers to (as Samuel Goldwyn famously said) “stay away in droves”. Hard times. Mary’s costs will rise, and for revenue to keep pace she will have to (1) to keep her prices consistent with inflation. If Max decides to move to San Francisco, what annual salary will he need to make in order to maintain the same real wage? If you're interested in further exploring the topic of inflation, take a look at Effects of Inflation on Suppliers and Demanders. Based on recent statistics, which of the following individuals would have the greatest probability of being unemployed? ***incorrect: -Gwyn will need to pay more capital gains taxes. Factors That Shift Demand Curves. Place the correct price in each blank, to reflect the effects of inflation. -GDP is going to decrease in the near future. Two things tempt governments to enact inflationary policies. Monopoly: Cause # 1. 1-burger chain A intro… 2-customer demand… 3-burger chain A hires… 4-burger chain B lays off… 5-unemployed burger chain…, Apply the correct label to each labor force participation rate line. Match the situation to the inflation-related problem it illustrates. Inflation . But higher wages raises the cost of production, which raises prices of goods and services again. (b) The same factors, if their direction is reversed, can cause a decrease in demand from D 0 to D 1. The price level in the year your parents bought their car was 50, while the price level today is 200. This rate is not due to (2) factors. There are ways for businesses to plan for inflation to reduce the chances of revenue loss. Use the table to complete the sentence about race and unemployment. 1-The cost of bananas increases dramatically. Micro: -why did company c increase its advertising budget? The United States suffered from high inflation and unemployment in the 1970s, and there are many theories about what caused it. In the short run, the economy moves from point A to pointB . Flatness problem: The universe appears to have a flat geometry. The last row of Table 1 at the start of this chapter showed that average hourly wage in the U.S. economy increased from $3.23 in 1970 to $19.55 in 2014, which is an increase by a factor of almost six. Answered Which of the following scenarios would cause inflation to occur? The output of an American company operating in another country contributes to the (3) of the United States. -Country B has a very high quality of life. correct: market values, price level incorrect: income tax rate, unemployment rate. Last year you … *** correct: -unemployment benefits -government regulation -lack of information ***incorrect: -industries shutting down due to long-term changes in consumer tastes -recession. 6-A family of three purchases a newly built home. 1-does not indicate 2-per capita GDP 3-average income. Even if inflation is low, the combination of inflation and a fixed income can create a substantial problem over time. 4-Almonds are grown for sale overseas. as of the dead ones!Read the inteare true orC.birde.migratory (Dr. - 3_, Finsi. By Andrew Zimmerman Jones, Daniel Robbins . Drag each government program to the appropriate type of unemployment the program would reduce. Which two nations lie in the upper right corner, with explosive growth in the money supply and, correspondingly, runaway inflation? Not all unemployment is (1). -Prices begin to rise, so firms increase output. An increase in the money supply — that is, a government literally printing money — can provoke inflation if it outpaces economic growth. T/F, All prices rise evenly during periods of inflation and deflation. The traditional CPI has a strong (4) bias. Q: Fill in the blanks to complete the passage about government actions that cause inflation. **incorrect: -The Great Recession did not affect the length of time people remained unemployed. 6-The cost of cable increases. In the short term, you can try to force the supplier to make some changes or lower the cost of the service when negotiating for a new contract. She decides she needs to expand her output because demand must be growing. Calculate the real GDP of the United States for the year 2014. A speedboat engine contributes $9,000 to the total price, and a race car engine is worth $12,000. Inflation can be Demand-pull when increasing demand from consumers leads to an increase in prices, or Cost-push when higher supply costs lead to higher prices. A person who retires on a fixed income at age 65 will find that losing just 1% to 2% of buying power per year to inflation compounds to a considerable loss of buying power after a decade or two. - 894771 1. She notices prices at other furniture stores have increased dramatically over the past two years. **correct: -Country B will eventually have a higher real GDP than Country A if the economy of each country continues to grow this way. Course Hero is not sponsored or endorsed by any college or university. GDP (4) measure the quality-of-life indicators that would explain this. ***incorrect: -Consumers need to purchase gas to get to work. ***correct: -Long-term agreements become too risky for lenders, making it more difficult to obtain a loan. […] Which of the following problems can inflation cause for suppliers? Last year you paid $24 for a round of golf and $12 to rent a golf cart. The Monetary Monopoly Model (Section 4.3) is a core model of Modern Monetary Theory. Inflation can arise from internal and external events; Some inflationary pressures direct from the domestic economy, for example the decisions of utility businesses providing electricity or gas or water on their tariffs for the year ahead, or the pricing strategies of the food retailers based on the strength of demand and competitive pressure in their markets. Do recessions always prevent a long-term increase in a nation’s real GDP? What might a decrease in sales of new cars indicate about the state of the economy? True 2. **incorrect: -GDP accurately captures all economic activity. This can help to trigger inflation and bring an end to the economic expansion. Ask your question. These two are the big problems that plague all the economies. Inflation can cause unintended redistributions for wage earners, too. Your parents bought their first car for $5,000. -The cost of living in the new city is 3% lower, and you’d be paid the same amount. The (1) unemployment rate while Economy X is (2) is 0%. 3-Video game consoles offer better graphics and gameplay than they did a decade ago. A. (top blue and bottom red). High inflation has the power to decimate savings accounts and render them worthless, while it also can create price and market instability. Use 2009 as the base period and round to the nearest whole number. Match the job sectors to their workforce shares from 1800 to 2010. unintended redistributions of purchasing power. This happen when prices for food and domestic … Planning Process and Others. That situation is called inelastic demand. Access the answers to hundreds of Macroeconomics questions that are explained in a way that's easy for you to understand. Which of the following are examples of non-market services? The unemployment rate in Economy X when it is growing normally is 5%. 3-Lonnie the police officer cashes her paycheck at the end of the week. Consumers and businesses alike have to deal with the impact of inflation, both good and bad. ***correct: food housing transportation ***incorrect: taxes investments. By the equation of exchange, the money velocity times (3) equals the price level times (4). These types of inflation are differentiated from each other by the cause that drives the price increase. Marshall benefits by receiving income so that he can continue to (1) goods and services while searching for a new job, which benefits society because it decreases the likelihood of an economic (2). Erodes Purchasing Power. **correct: -Gwyn may need to spend money to update her price displays throughout the store. Which of the following scenarios make it difficult to accurately measure the CPI? False 3. The fifth type, galloping inflation, is when prices rise 10% or more a year. Log in. This preview shows page 6 - 9 out of 10 pages. These negative consequences can, in turn, have an effect on output and the employment rate under certain circumstances. Inter-Company Investment 3. ***correct: -The quantity of goods and services in the economy increases by 2% while the supply of money increases by 4%. 70 million are full-time students and retirees Decreases in aggregate demand. Impact of Inflation: Financial management is basically concerned with acquisition, financing and management of assets of business concern in order to maximize the wealth of the firm for its owners. Which of the following problems can inflation cause for suppliers? Assuming that the trends from 1980 to 2008 continue for another decade, which country would you expect to have a lower standard of living in 2020 than in 1970? 30 million are employed part-time. ***incorrect: -higher demand -lower prices. C. Introducing Textbook Solutions. Liberty University ECON 214 InQuizitive chapter 8 Complete solution.docx, Houston Community College • ECONOMICS 2301, Hillsborough Community College • ACG 2021, Mcconnell_Brue_Economics_17th_edition Chapter 7, Liberty University ECON 214 InQuizitive Assignment 3 Complete solution.docx. High levels of inflation aggravated agricultural problems, adding fuel to the fire of escalating unrest. following as factors that cause cost overruns on construction projects in Saudi Arabia: the effects of weather, the number of projects going on at the same time, social and cultural impacts, the project location, a lack of productivity standards in Saudi Arabia, the level of competitors, supplier manipulation, economic stability, Match the use of GDP data to the appropriate situation. Y: Lower-than-expected inflation will translate into a lower overall price level. When we think of inflation we usually think of how it affects us as consumers. ADVERTISEMENTS: Factors which causes Inflation (Factoring affecting Demand and Supply)! For purposes of computing GDP, how are net exports calculated? That year, you paid $80 for a day at a theme park. 1. It is the most common cause of inflation. The business owner worries that the loan rate is too high. 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