In a market economy, uncertain levels of inflation
A) make prices less useful as signals for resource allocation.
B) prompt firms to enter into fewer short-term contracts, and more long-term contracts, with suppliers.
C) balance out income redistribution in the long run.
D) are more beneficial to lenders than to borrowers, as lenders have a tendency to overestimate the expected inflation rate.
Question 2
If banks hold no excess reserves, checkable deposits total 1.5 billion, currency totals 400 million, and the required reserve ratio is 10, then the monetary base equals
A) 550 million.
B) 1.54 billion.
C) 1.9 billion
D) 15 billion.
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