Which of the following statements about unanticipated inflation is true?
a. It reduces average purchasing power in the economy.
b. It reduces total purchasing power in the economy.
c. It redistributes purchasing power in the economy.
d. It reduces nominal wages.
e. Its effects are spread evenly throughout the economy so that no one gains or loses from inflation.
C
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The ________ the marginal tax rate, the ________ the expenditure multiplier
A) larger; more negative B) smaller; smaller C) larger; larger D) smaller; larger E) None of the above is correct, because the expenditure multiplier is not related to the marginal tax rate.
Jones is hungry, but is willing to postpone lunch as long as he can have a much larger meal at dinner. The compensation of the larger meal at dinner time suggests that Jones
A) is a glutton. B) acts irrationally because it is best to have three meals a day. C) has a positive rate of time preference with regard to today's meals. D) does not consider lunch to be a scarce good.