What is marginal cost?
Marginal cost is the rate of change in total variable cost. It is the increase in total variable cost for producing an extra unit of output. Marginal cost can be measured by the slope of the tangent to the total variable cost curve.
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You borrow money to buy a house in 2009 at a fixed interest rate of 5.5 percent. By 2012, the inflation rate has steadily fallen to 1.5 percent from the recent high of 3.0 percent in 2009
Considering only your mortgage, is inflation good news or bad news for you? A) bad news, because it makes the nominal value of your mortgage payments increase B) bad news, because it makes the real value of your mortgage payments increase C) good news, because it makes the real value of your mortgage payments decrease D) bad news, because inflation hurts everyone
Suppose that there is a negative aggregate supply shock and the central bank commits to an inflation rate target
A) If the commitment is credible, the public's expected inflation will remain unchanged. B) Credible policy produces better outcomes on both inflation and output in the short run. C) Policies that are not credible produce worse economic contraction. D) all of the above. E) both A and C.