For the purchasing power of money to increase, the price level has to fall

Answer the following questions true (T) or false (F)

1. If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they pay) and hurts lenders (by reducing the real interest rate they receive). 2. The costs to firms of changing prices are called menu costs. 3. If inflation is unanticipated, no redistribution of income can occur.

Monopolistically competitive firms use advertising exclusively to inform customers about the real differences between their products and their competitors' products.

Answer the following statement true (T) or false (F)