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- a) Why do some economists claim that we should not worry too much about inflation?True or False Since people buy a lot of food and oil (gasoline), we should pay most attention to fluctuations in prices of those two items when talking about inflation. Explain.b) Other economists think that there are significant costs associated with inflation above 2-3%. What are they? Briefly discus
- 12. How might it be possible that we print all this money but inflation hasn't increased? (hint: MV = PY)What effect does inflation have on the purchasing power of money? A. It increases the purchasing power of money. B. It decreases the purchasing power of money. C. It has no effect on the purchasing power of money. D. It initially decreases but then increases the purchasing power of money over time.6. In 2023, breakthroughs in solar panel manufacture and installation and low-cost battery storage allow tens of millions of Americans and businesses to slash their energy bills and produce more for every energy dollar. Assume the growth rate in 2022 was 2% and inflation was 2% a. Show what kind of effects these breakthroughs would have on inflation and growth in 2023 and on into the long run. b. Assume the Federal Reserve aims to keep inflation at 2% per year. What would the Fed do in response to the events of 2023? Assume the economy is at its second short run equilibrium after the 2023 events when the Fed acts (i.e, shift SRAS once due to a change in expected inflation before modeling the Fed's action). What does the Fed's action do to inflation and growth in the short run? How would the Fed's actions work out in the long run?
- What do you mean by inflation? What are the causes of inflation?In 1 paragraph, describe what has happened to inflation over the past decade."Inflation tax" means that: Select one: a. as the price level rises, taxpayers are pushed into higher tax brackets. b. as the price level rises, the real value of money held by the public decreases. c. as taxes increase, the rate of inflation also increases. d. in a hyperinflation, the chief source of tax revenue is often the printing of money.
- stant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal. 4. The economist John Maynard Keynes wrote in The Economic Consequences of the Peace (1919): "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can con- fiscate, secretly and unobserved, an important part of the wealth of their citizens." Justify Lenin's assertion. 5. Suppose that a country's inflation rate increases sharply.. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can think of any way in which holders of savings accounts are hurt by the increase in the inflation rate? you 12 6. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the ernment. Why might…Which of these methods to control inflation is related to monetary policy? a. setting price ceilings to key commodities b. reducing the money supply in the economy c. charging pollution fees on industries d. increasing tax rates and imposing new taxesWhich of the following describes a situation in which the person is hurt by inflation? Select one: a. a person paid a fixed income during an inflationary period b. a retiree whose pension is adjusted for inflation c. a person who borrows money during a period when inflation is under-predicted d. a person who lends money during a period when inflation is over-predicted