Difference between expected and unexpected inflation

Reference no: EM1314698

1. Explain how the distinction between expected and unexpected inflation is important to the distributional effects of inflation.

2. Categorize the expectations described below as rational, adaptive, or extrapolative (each category is represented once).

a. Economists models are predicting that a rapid increase in the money supply will cause prices to increase in the future, so I'm expecting prices to increase too.

b. The trend for the past three years has been for prices to rise 3% per year, so I'm expecting prices to rise 3% next year.

c. Inflation was 2% last year and 4% this year. I think inflation will be about 3% next year.

Reference no: EM1314698

Questions Cloud

Predictions for nominal wage increases and productivity grow : Given the following predictions for nominal wage increases and productivity growth, state your forecast for inflation (assume this is all the information available to make the forecast).

What will be the budgeted purchases for july : Budgeting involves computation of budgeted purchase - Given the above information, what will be the budgeted purchases for July? Round your answer to the nearest whole dollar.

Maximize the profit using graphical method : Set-up/solve the problem graphically. (How many ceiling fans and how many floor fans should be made?)

Calculate the critical angle for a glass air : A 2.8 kg block slides along a frictionless horizontal with a speed of 5.5 m/s. After sliding a distance of 8m, the block makes a smooth transition to a frictionless ramp inclined at an angle of 43 degrees to the horizontal. The acceleration of gravit..

Difference between expected and unexpected inflation : Explain how the distinction between expected and unexpected inflation is important to the distributional effects of inflation.

Financial planning involves computation of series of budget : Financial planning involves computation of series of budget - How does this price change effect differ from the sales volume effect you described above?

Solving the algebraic expression by multiplication rule : Solving the algebraic expression by multiplication rule.

What is the initial total mechanical energy of projectile : A box with a mass of 8 kg is lifted (without acceleration) through a height of 9 m, in order to place it upon the shelf of the closet.

Least-cost shipping schedule : Using What's Best! (or Solver) determine the least-cost shipping schedule, where each of three (3) hardware vendors provide up to two hundred (200) units and each of six (6) buyers demand one hundred (100) units.

User Account

All Pages