The full indexation of wages and prices
A. is widespread in most industrial countries
B. would ensure that each year's inflation rate could always be correctly anticipated
C. would cause some real wage rigidities
D. would greatly help an economy to adjust back to full employment after a supply shock
E. would eliminate all lags between measuring price changes and making wage payments
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The view that a small positive rate of inflation may actually be good for the economy was first advanced by
A. Ben Bernanke
B. Milton Friedman
C. John Maynard Keynes
D. William Poole
E. James Tobin
An unanticipated increase in inflation is a problem since
A. gains and losses from real wealth transfers cannot be easily predicted
B. higher inflation always means lower growth in real GDP
C. it will lead to a decrease in nominal wages
D. households who hold fixed dollar assets will experience a higher real rate of return
E. none of the above
An unanticipated increase in inflation will lead to a redistribution of wealth but
A. people who hold liquid assets will not suffer any losses
B. will not benefit borrowers in any way
C. will not lead to a change in the real wage rate
D. will not lead to a change in real interest rates
E. none of the above
The redistribution effect that arises from an unanticipated increase in inflation will affect
A. insurance contracts
B. cash holdings
C. people who own fixed rate bonds
D. all of the above
E. only B) and C)