If inflation is expected to decrease, how should the wage setters behave to prevent an increase...

If inflation is expected to decrease, how should the wage setters behave to prevent an increase in unemployment?

Consider an economy with low inflation, high budget deficit, and moderate growth rates. Use the IS-LM model to discuss the short-run effects of a possible fiscal contraction.

Expert Solution

Rahul Sunny answered 2 years ago

If expected inflation increases, investors will consider selling bonds as the real value of this investment will decrease and bond yields should increase.

Which of the following are correct?I. If expected inflation increases, investors will consider selling bonds as the real value of this investment will decrease and bond yields should increase.II. Reinvestment risk occurs when interest rates decrease so that coupons from a bond are reinvested at a lower rate than originally expected.III. If interest rates are expected to increase, an investor should consider selling long-maturity bonds and buying short-maturity bonds to decrease portfolio duration.IV. If the risk of default on a...

An increase in demand can be expected to ["increase", "decrease"] equilibrium price and ["decrease", "increase"] ...

An increase in demand can be expected to ["increase", "decrease"] equilibrium price and ["decrease", "increase"] equilibrium quantity. An increase in supply can be expected to ["decrease", "increase"] equilibrium price and ["decrease", "increase"] equilibrium quantity. If there is an increase in demand and an increase in supply then we can expect equilibrium price to ["increase", "stay the same", "it is not possible to say", "decrease"] and equilibrium quantity to ["decrease", "stay the same", "increase", "it is not...

Does union increase or decrease efficiency? Does union increase or decrease wage inequality? Discuss.

By how much would the government spending need to increase to prevent the $300mil decrease in output?

Imagine that the US economy suddenly falls into the recession and the GDP is forecasted to decrease by $300mil. We know that the propensity to consume (c1) is 0.6. The government wants to fight the recession and it is considering either a massive spending boost or a new tax reformQuestion: By how much would the government spending need to increase to prevent the $300mil decrease in output?(Report your answer in millions. For example, if your answer is $550mil, write down...

Inflation How do economists measure inflation? Did the CPI recently increase or decrease? Visit the Bureau...

Inflation How do economists measure inflation? Did the CPI recently increase or decrease? Visit the Bureau of Labor Statistics website and explore the Consumer Price Index section. Summarize the latest press release and explain what caused the index to increase or decrease. (You can also talk about COVID-19)

An increase in Money Supply will decrease the interest rate and increase the level of inflation...

An increase in Money Supply will decrease the interest rate and increase the level of inflation in the domestic market ...An increase in Money Supply will decrease the interest rate and decrease the exchange rate (the rate at which currencies can be traded for one another) I can't understand. Please explain this with a diagram.

Should inflation be controlled by wage-price controls?

do you think the U.S. government should increase the minimum wage every year to match inflation?...

do you think the U.S. government should increase the minimum wage every year to match inflation? (your answer should be at least one paragraph)

1.should these monopolists increase or decrease output, increase or decrease price, and on what information is...

1.should these monopolists increase or decrease output, increase or decrease price, and on what information is your answer based? Can the monopolists maximize profits minimize a loss ,or should they shutdown? Give a reasons for your answers based on the numbers in the rows Price MR Q TR TC P/L TVC ATC AVC MC 10 5 10 100 50 +50 30 5 3 7 50 <50 50 2500 2600 -100 1600 52 32 50 10 5 1000 10000 8000 +2000...

How does a decrease in expected inflation affect output and interest rates in the IS-LM model?...

How does a decrease in expected inflation affect output and interest rates in the IS-LM model? Explain. Does the Fisher effect hold in this context? Explain.

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