"Inflation reduces the velocity of money because people reduce their money holdings." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?
The statement is incorrect. As the inflation rate rises, people reduce their money holdings by spending money more rapidly. As a result, the velocity rises rather than falls.
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A rightward shift of the aggregate demand curve leads to
A) an upward movement along the short-run Phillips curve. B) neither a movement along nor a shift in the short-run Phillips curve. C) a downward movement along the short-run Phillips curve. D) a leftward shift of the short-run Phillips curve. E) a rightward shift of the short-run Phillips curve.
Which of the following statements is CORRECT?
A) A firm does not need to take into account its sunk cost when making current decisions. B) Long-run decisions are easily reversed. C) Short-run decisions are not easily reversed. D) In the long run, a firm can change its plant but not the quantity of its labor.