When the actual rate of inflation exceeds the expected rate:
A. the unemployment rate will temporarily rise.
B. firms will experience rising profits and thus increase their employment.
C. the actual rate of inflation will fall.
D. nominal wages will decline.
B. firms will experience rising profits and thus increase their employment.
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The income effect of a price change refers to
A) the change in demand that occurs when both income and price change. B) the change in demand that occurs when consumer income changes. C) the change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. D) the change in the quantity demanded that results from a change in price, making the good more or less expensive relative to other goods, holding everything else constant.
Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers. Tom makes the lemonade while Jerry sells it. Jerry argues that Tom is transferring the lemonade to him priced too high, which forces him to charge the customers a high price, losing sales. Does the decision maker have the incentive to make a good decision?
a. Yes, because it increases the division profit b. No, because it decreases division profit c. Yes, because it does not affect division profit d. No, because it increases company-wide profit