If the Fed increases the inflation rate in the short run before people's expected inflation changes, what occurs? What happens in the long run?
What will be an ideal response?
Increasing the inflation rate with no change in the expected inflation rate moves the economy along its short-run Phillips curve. The inflation rate rises and the unemployment rate falls. The short-run Phillips curve does not shift. In the long run, however, people will revise their expected inflation rate upward to match the higher inflation. As this revision occurs, the short-run Phillips curve shifts upward. The unemployment rate and the inflation rate both increase. In the long run, when the higher inflation rate is fully expected, the short-run Phillips curve stops shifting upward. At this point, the unemployment rate has risen from its initial fall so that it now equals the natural unemployment rate. The inflation rate is permanently higher.
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Refer to Table 7-4. Fill in the following table with the opportunity costs of producing light bulbs and flash drives for Mexico and Canada
Light Bulbs Flash Drives Mexico Canada What will be an ideal response?
If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue, total cost is $1,674 and total revenue is $2,000, its average profit is
A) $326. B) $40. C) $6.52. D) impossible to determine without additional information.