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Alborosie
3 years ago
7

Is it possible to decrease inflation without causing a recession and its concomitant increase in unemployment? The orthodox answ

er is "no." Whether they support the "inertia" theory of inflation (that today's inflation rate is caused by yesterday's inflation, the state of the economic cycle, and external influences such as import prices) or the "rational expectations" theory (that inflation is caused by workers' and employers' expectations, coupled with a lack of credible monetary and fiscal policies), most economists agree that tight monetary and fiscal policies, which cause recessions, are necessary to decelerate inflation. They point out that in the 1980's, many European countries and the United States conquered high (by these countries' standards) inflation, but only by applying tight monetary and fiscal policies that sharply increased unemployment. Nevertheless, some governments' policymakers insist that direct controls on wages and prices, without tight monetary and fiscal policies, can succeed in decreasing inflation. Unfortunately, because this approach fails to deal with the underlying causes of inflation, wage and price controls eventually collapse, the hitherto-repressed inflation resurfaces, and in the meantime, though the policymakers succeed in avoiding a recession, a frozen structure of relative prices imposes distortions that do damage to the economy's prospects for long-term growth.
The passage suggests that the high inflation in the United States and many European countries in the 1980’s differed from inflation elsewhere in which of the following ways?(A) It fit the rational expectations theory of inflation but not the inertia theory of inflation.(B) It was possible to control without causing a recession.(C) It was easier to control in those countries by applying tight monetary and fiscal policies than it would have been elsewhere.(D) It was not caused by workers’ and employers’ expectations.(E) It would not necessarily be considered high elsewher
Business
1 answer:
NeTakaya3 years ago
5 0

Answer:

The answer is: E) It would not necessarily be considered high elsewhere

Explanation:

Usually the inflation rate in the US and Europe is around 1-3%. In the early 1980's the US inflation rate was above 10% so it was considered huge. But if you consider it against inflation rates in other countries, like Argentina for example, which currently has an annual inflation rate of over 60% then it wasn't that big. During the 1980's many countries suffered from hyperinflation, with monthly inflation rates of over 50%.

So the high inflation rate in the US and Europe wasn't necessarily high for other countries.

You might be interested in
Interest rates on 3-year Treasury securities are currently 1.92%, while 10-year Treasury securities yield 5.62%. If the pure exp
FromTheMoon [43]

Answer: 7.24%

Explanation:

From the question, we are told that:

3 years treasury securities have an interest rate = 1.92%

10 years treasury security has an interest rate = 5.62%

Let the 7 year treasury security interest in 3 years be represented by z.

Based on the expectation theory

( 1+1.92%)^3 × (1 + z%)^7 = (1 + 5.62%)^10

(1+0.0192)^3 × (1 + z%)^7 = (1 + 0.0562)^10

(1.0192)^3 (1 + z%)^7 = (1.0562)^10

1.05871(1 + z%)^7 = 1.72767

Divide both side by 1.05871

(1 + z%)^7 = 1.72767/1.05871

(1 + z%)^7= 1.6319

1 + z% = 1.6319^1/7

1 + z% = 1.6319^0.1429

1 + z% = 1.0724

z% = 1.0724 - 1

z% = 0.0724

We then convert the decimal to percentage

z = 7.24%

The market believes that 7-year Treasury securities will be yielding 7.24% in 3 years .

3 0
2 years ago
Kim is the sales representative for a major textbook publisher. When she calls on the business faculty at General University, sh
Juli2301 [7.4K]

Answer:

Users

Explanation:

The users be the ones to use the product, initiate the purchase process, generate purchase specs and evaluate product performance after the purchase.

5 0
3 years ago
Read 2 more answers
If a company does not intend to expand globally, but exports some products without customizing for international markets, it sho
ra1l [238]

Answer:

yes

Explanation:

5 0
3 years ago
A group of sellers who agree to restrict their collective output in order to drive up prices above marginal costs is a:
Salsk061 [2.6K]

A group of sellers who agree to restrict their collective output in order to drive up prices above marginal costs is known as a:

  • <u>Cartel</u>

According to the given question, we are asked to show the term which can be best used to <em>describe </em>a group of sellers who make an agreement to <em>reduce their collective output</em> so that price of goods would increase above their marginal costs.

As a result of this, we can see that this group of people in the business world are known as cartel because they behave unethically so that they could have increased profit on sales.

Read more here:

brainly.com/question/15294015

3 0
2 years ago
Pharoah Corporation had the following activities in 2020. 1. Payment of accounts payable $843,000 4. Collection of note receivab
DIA [1.3K]

Answer:

The amount Pharoah should report as net cash provided (used) by financing activities in its 2020 statement of cash flows is $344,000.

Explanation:

Pharoah Corporation

Statement of cash flows (extract)

Proceeds from common stock                $256,000

Proceed from bond payable                    $466,000

Dividend paid                                           ($333,000)

Purchase of treasury stock                        ($45,000)

Net cash flows from financing activities    $344,000

Note that the payment of accounts payable and collection of notes receivable only affect the operating activities section of the cash flows.

7 0
2 years ago
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