Author Question: Suppose the central bank increases the money supply in an economy unexpectedly during a year. If the ... (Read 70 times)

kfurse · **on:** Jun 30, 2018

Suppose the central bank increases the money supply in an economy unexpectedly during a year. If the current inflation rate in this country is 3.4 percent, then according to new classical economists, the expected inflation rate for the following year would be:
a. 3.4 percent.
b. less than 3.4 percent.
c. 2.4 percent, because people form their expectations adaptively.
d. around 6.8 percent.
e. greater than 3.4 percent.

Question 2

An increase in demand will increase total revenue:
a. Always.
b. Only if supply is relatively inelastic.
c. Only if supply is relatively elastic.
d. Only if supply is unit elastic.