Your friend Shahla argues that inflation is bad for the economy because it lowers everyone's purchasing power. How would an economist respond to Shahla's statement?
a. Her statement is true.
b. Her statement is false because inflation redistributes income but does not change the average level of income in the economy.
c. Her statement is true when everyone's nominal income changes by the same amount.
d. Her statement is true when wages and benefits are not indexed to the CPI.
e. Her statement is true only in a closed economy.
B
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The GDP deflator is designed to adjust nominal GDP
a. for changes in the unemployment rate. b. for changes in prices. c. for problems that arise because of externalities. d. for changes in interest rates.
Prior to the 1980s, financial institutions called thrifts:
A. included commercial banks. B. were permitted to offer checking accounts and accept savings deposits, and could pay interest on both. C. could not pay interest on checkable deposits. D. were permitted to accept only savings deposits with no checking privileges.