Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy. Which of the following will be observed?
a. The actual inflation rate will match the low rate that people had expected.
b. The actual inflation rate will be higher than the natural rate.
c. The actual inflation rate will be higher than the low rate that people had expected.
d. The actual inflation rate will be lower than the high rate that people had expected.
e. The unemployment rate will be lower than the natural rate.
Question 2
If good A had twice as many good substitutes as good B, but good B consumed twice the amount of a buyers income as good A, goods A and B would have the same elasticity of demand.
a. True
b. False
Indicate whether the statement is true or false
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