25. Which best describes the incentives that expected inflation provides to dema

Question

25. Which best describes the incentives that expected inflation provides to demanders (consumens) in the economy? A) Consumers will want to purchase now before prices rise further B) Consumers will buy less now and wait until prices stabilize before making more parchases. C) Consumers will prefer to save money rather than spend it on items whose prices are rising D) Consumer groups will spontaneously protest the price increases by sponsoring boycotts E) Consumer groups will lobby Congress to see if the inflation can be stopped 26. Fiscal policy is defined as the intentional use of the govermment's A) power to tax and spend to alter aggregate supply to achieve the full employment level of output B) power to tax and spend to achieve a balanced budget C) power to tax and spend to alter the level of ageregate demand to achieve a full employment level of output D) legislative power to coerce bouseholds and businesses into altering their spending habits in order to fight inflation replacing some income during 27. The first 26 weeks of unemployment insurance functions as periods of economic downtarn A) a form of discretionary fiscal policy B) a tax on unemployment insurance recipients C)-n automatic stabilner D) a strategy to soak the rich 28. In calculating the Consumer Price Index, the 'market basket' is A) the tangible goods, but not services, the typical consumer purchases during a given period B) the hypothetical bundle of goods that consumers would purchase if they had enough income C) the comabination of goods and services that the typical consumer purchases C) D) sum total of all grocery itenms the typical consumer purchases during a given time period 29. The type of money the U.S. and most nations use is called A. conimodity money B. fiat money C paper money D. gold 30. If the Federal Reserve wished to stimulate the ecosomy it would A. Purchase U.S. treasury securities B. Sell treasury securities C Increase the diacouat rate D. Sell U.S treasury securities

Explanation / Answer

Question number 25 the correct option is option A

This is perhaps because if expected inflation is higher in the future people will try to spend now so that they can save money and have not to purchase the same product in future when the price is higher.

Question 26 the correct option is option C

Fiscal policy is basically a discretionary policy of the government where it can increase the government spending or it can reduce the tax rate in order to stimulate the aggregate demand and bring the economy to its original long run full employment level

Question 27 the correct option is option C

Automatic stabilizers as the name suggest are instruments that automatically stabilizers the economy when it is not in a good time such as when it is in recession. Unemployment insurance is an automatic stabilizer because it provides income to the unemployed and hence stabilizes his current position in recession when he is not getting a job.

Question number 28 the correct option is option C

Question number 29 the correct answer is option B

Question number 30 the correct option is option A.

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