An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.

The costs of inflation to households and firms due to holding less money and making more frequent trips to the bank are known as

A) seigniorage. B) menu costs. C) velocity costs. D) shoe-leather costs.

Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. Harry should

A. not hire the second barber because he is less productive than the first barber. B. hire the second barber because he will add $108 to profits. C. not hire the second barber because he will diminish profits. D. hire the second barber because he will add $28 to profits.