Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n):
a. inflation rate of 4 percent, if velocity of money in circulation is constant.
b. inflation rate of -4 percent, if velocity of money in circulation is constant.
c. 7 increase in the price level each year.
d. 7 decrease in the price level each year.
e. increase in the velocity of money in circulation.
QUESTION 3An adverse supply shock would shift:
a. only the short-run aggregate supply curve outward.
b. only the long-run aggregate supply curve outward.
c. only the long-run aggregate supply curve inward.
d. only the short-run aggregate supply curve inward.
e. both the long-run and the short-run aggregate supply curves inward.
QUESTION 4In an economy in which velocity of money in circulation is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a:
a. constant price level.
b. slowly increasing price level.
c. slowly decreasing price level.
d. stable 4 percent growth in real GDP.
e. stable 4 percent growth in nominal GDP.
QUESTION 5Which of the following supply shocks would shift the aggregate supply curve inward?
a. A decrease in business taxes
b. A decrease in gasoline taxes
c. A decrease in the cost of raw materials
d. A decrease in agricultural output
e. A decrease in the amount and cost of government regulation
Quick Reply
