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x Q Not secure ghered.com/aunchpad/cowentabarrokmacro Je/9301637/startePMULTIPART Done Midterm 1 5. Inflation can be defined as: the rise and fall of the general level of prices in an economy. the boom and bust cycles of an economy. * the increase in the general level of prices in an economy the general rise in the level of output in an economy 6. Which one of the following choices would cause the demand curve for an inferior good to shift to the left? a rise in incomes * a rise in the price of the inferior good a fall in incomes a fall in the price of the inferior good 7. Suppose that consumers begin to the price of housing will be lower next period. What will happen in the market for housing as a result of these expectations? Nothing will happen now. Consumers wiall wait for the price to actually decrease before changing their behavior. Investors will buy up all the housing inventory believing they are getting a "deal Demand for housing will increase now as people adjust to the expectation Demand for housing will begin to fall now as people postpone their purchase until prices are lower 8. Figure: Supply Shift Price $100 80F 60 F 40 F 20 Remaining: 1:40:00 Start: 7:04 PM O Type here to search

Explanation / Answer

5. the increase in the general level of prices in an economy

In an inflation, the general level of prices for goods and services rise and, subsequently, the purchasing power of the currency falls

6. a rise in incomes

There is an inverse relationship between income and the demand for inferior goods which means in case of inferior goods income effect is negative.

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