Author Question: Critically evaluate the statement Honolulu is an expensive place to live. Therefore the inflation ... (Read 113 times)

urbanoutfitters · **on:** Jun 30, 2018

Critically evaluate the statement Honolulu is an expensive place to live. Therefore the inflation rate must be high in Honolulu.

What will be an ideal response?

Question 2

If there is a rise in the price level, there is a(n) ________ movement along the AS curve because there is ________ in the quantity of real GDP supplied.

A) upward; a decrease
B) downward; an increase
C) upward; no change
D) upward; an increase
E) downward; a decrease

ttt030911 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The statement confuses the price level with the inflation rate. Inflation is a flow variableit measures changes in prices from year to year, while the price level is a stock variable. The statement observes the price level, not the inflation rate.

Answer to Question 2

D