Redistributions of income and wealth between different groups. For a limited time, find answers and explanations to over 1.2 million textbook exercises for FREE! Is the Coronavirus Crisis Increasing America's Drug Overdoses? d. an adverse supply shock such as an increase in the price of oil : C. reduction in the rate of inflaition: 49. real incomes of the users of that product rise. Course Hero, Inc.

An increase in the average level of prices of goods and services. Which of the following is a macro consequence of a sudden increase in the average level of prices?

Decreased uncertainty. Get step-by-step explanations, verified by experts. Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.

Introducing Textbook Solutions.   Terms. Increased windfall profits to creditors who have lent large amounts of money. If a bank has already lent money at fixed interest rates, then during a period of higher-than-expected inflation it experiences: Which of the following groups is protected from a sudden increase in inflation? difference in revenue and cost, and there is no profit effect. According to Investopedia, inflation is the rate of increase in the general level of prices. redistributions of income and wealth between different groups. The price of one good in comparison with the price of other goods, If the price of iPods rises 10 percent during a year when the level of average prices rises 3 percent, the relative price of iPods compared with other goods. Answer A). B. D. Creditors are made better off. A mortgage that adjusts the nominal interest rate to changing rates of inflation is, the nominal interest rate minus the anticipated rate of inflation, All of the following are true of the real interest rate except it, equals the foreign exchange rate minus the inflation rate, If the nominal interest rate is 13 percent and the anticipated rate of inflation is 8 percent the real interest rate is, If the nominal interest rate is 10 percent and the real interest rate is 6 percent, The expected rate of inflation is 4 percent, The most desirable inflation rate is the rate that, has the least effect on the behavior of companies, investors, consumers, and workers, If your nominal income remains constant at $3,000 while the price of an important product in your budget such as cell phone service rises from $50 to $100 your real income has, All of the following are detrimental macro consequences of inflation except. Which of the following results in higher inflation and higher unemployment in the short run? However, it seems reasonable to conclude that the material risk is unexpected increases in money supply, thereby pushing inflation higher.

C. Redistributions of income and wealth between different groups. It is the same as your real income in times of high inflation. When lenders are uncertain about future inflation, they charge borrowers higher interest to compensate for the loss of purchasing power caused by inflation. Assume the CPI increases from 110 to 121 and Manny's nominal income increases from $100,000 to $120,000 over the same period. D) The federal government increases the tax rate.   Privacy In the full employment and balanced growth act of 1978, Congress set an inflation goal of no more than 3 percent, An inflation goal set at a low rate but greater than zero allows all of the following except, If the CPI doesn't measure product quality improvements, the CPI tends to. Generally speaking, which of the following groups would tend to gain real income from the wealth effects of inflation? The lower money supply results in a higher interest rate and lower output level (i.e., an upward shift in the 1 University of North Carolina, Charlotte • ECON 2101, University of Texas, San Antonio • POL 1113, Copyright © 2020. Inflation means. Will 5G Impact Our Cell Phone Plans (or Our Health?! Speculation during periods of inflation can result in all of the following except, More resources going into the production process, a measure of changes in the average price of consumer goods and services.

As the price level increases, purchasing power is decreased. b. a more contractionary monetary policy. E) Actions described in both A) and D). Selling bonds reduces the money supply in the economy. A. The uncertainty that results from inflation causes changes in, Consumption, saving, and investment behavior. Unless all parties protect themselves from the effects of changes in the price level by using COLAs. Thus, borrowers benefit by repaying debts with money that is worth less. Manny's real income has: If the CPI increases from 250 to 275 for one year, the rate of inflation for that year is: The base period used in computing a price index is. Topic: REDISTRIBUTIVE EFFECTS OF INFLATION, The redistributive mechanics of inflation include all of the following. Because of its destabilizing effects on the economy, unexpected inflation is of considerable concern to economic policymakers. Average prices are rising, but it is not certain what is happening to relative prices. Oh no! Because all prices do not change at the same rate, people buy different combinations of goods and services and own different combinations of wealth. Learning Objective: 07-02 Why inflation is a socioeconomic problem. Solution for If a government gains from unexpected inflation when it borrows, why would it choose to offer indexed bonds? At the same time prices on average have risen by 5 percent. Your friend, All of the following push a country inside its production possibilities curve except. ), The Secret Science of Solving Crossword Puzzles, Racist Phrases to Remove From Your Mental Lexicon. Real income is a measure of the quantity of goods and services your dollars will buy, and your. Redistribution of income and wealth between different groups. A fixed reference year from which meaningful comparisons can be made. a. a more expansionary monetary policy. If the nominal interest rate is 13 percent and the anticipated rate of inflation is 8 percent the real interest rate is. Lenders, on the other hand, are hurt by unexpected inflation. To construct the Consumer Price Index, the Bureau of Labor Statistics must: find out what people buy with their incomes and how the prices of what they buy change, annual percentage rate increase in the average price level. All of the following are microeconomic consequences of inflation, Prices, incomes, and wealth change due to changes in inflation, while profit is based more on the. Which of the following results from unexpected increases in the rate of inflation? It looks like your browser needs an update. Prior to WWII the united states experienced periods of both deflation and inflation, All of the following statements about inflation in the United States are correct except, Inflation was at its worst during the Great Depression, When natural disasters, such as hurricanes on the U.S. Gulf Coast or an earthquake in Japan, disrupt supply chains and push up the costs of production, this may result in, If OPEC raises the price of oil and production costs increase, this may cause. Value of final output produced, adjusted for changing prices. A primary function of the Federal Reserve Bank is to control the United States money supply with the goal of keeping prices stable. If you were interested in charting prices of resources used by producers or energy which of the following would you use? 48. c. a decrease in the minimum wage. Increased windfall profits to creditors who have lent large amounts of money. nominal income is the amount of money you receive in a particular time period. As the price level increases, purchasing power is decreased. To ensure the best experience, please update your browser. Which of the following results from unexpected increases in the rate of, 28 out of 32 people found this document helpful. Course Hero is not sponsored or endorsed by any college or university. Redistribution occurs because different people buy and sell different goods and own different assets. Fact Check: What Power Does the President Really Have Over State Governors? Which of the following is a likely macroeconomic consequence of inflation? Your friend claims he is better off. Which one of the following statements about the United States is true? Redistribution of income and wealth between different groups.
Thus, borrowers benefit by repaying debts with money that is worth less. Which of the following results from unexpected increases in the rate of inflation? Inflation______ the purchasing power of money, If your rent increases from $1,000 to $1,100 over a period of one year and your income rises from $6,000 to $7,000, your nominal income has, Increased, and your real income has increased, If the price of your cell phone service increases from $70 to $105 over a period of one year and your income rises from $1,500 to $1,525, your nominal income has, increased, but your real income has decreased. This preview shows page 31 - 33 out of 72 pages. 5%. According to Investopedia, inflation is the rate of increase in the general level of prices. Money income measured in current dollars. Which of the following results from unexpected increases in the rate of inflation. When the price of a product rises faster than the inflation rate. People who owns assets that are appreciating faster than the inflation rate, A friend tells you that his income has risen every year by 5 percent. An automatic adjustment of nominal income to the rate of inflation. Which of the following is often watched closely as a clue to potential changes in consumer prices in the future?
Which of the following results from unexpected increases in the rate of inflation?

Borrowers benefit from unexpected inflation. An increase in inventory, expected or otherwise means that the product, or service (Inventory in service industries is underutilized servants) isn't moving. The amount of money income received in a given time period, measured in current dollars, is, Nominal income is based in today's dollars but is less helpful in determining the actual amount of. Borrowers who have loans at fixed interest rates. Which of the following results from unexpected increases in the rate of inflation? Which of the following is not true about your nominal income? Which of the following explains why redistribution occurs during inflation? Festival of Sacrifice: The Past and Present of the Islamic Holiday of Eid al-Adha.

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