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It has been argued that higher inflation causes business firms to become permanently less efficient because they now have more pricing power. If this were true and economic output was initially at its potential level, then compared to the standard model, a fiscal expansion would cause:
a. Disinflation.
b. Higher inflation than in the standard model.
c. Lower inflation than in the standard model.
d. Illustrate what happens to inflation is indeterminate; it could be either higher or lower than in the standard model.
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The developing country uses the $100 bank balance to import $100 worth of food from the United States (US).
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Elucidate why your answer to part (a) is an example of marginal analysis also optimizing behavior in general.
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A bank manager advises all of his loan officers that the average cost of funds for the bank over the past year
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