Answer the Questions Below

question 96

Essay

Answer the questions below:
(A)Is there a unique rate of inflation that corresponds to long-run equilibrium? Explain. What determines the rate of inflation when the economy is at long-run equilibrium?
(B)Suppose the central bank is interested in stimulating growth in the economy. Should it aim for a higher or lower target inflation rate? Will higher growth be achieved in the short run and the long run?

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Definitions:

Selling Price

The amount of money a buyer pays to acquire a product or service from a seller.

Absorption Costing

An accounting method that includes all production costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit, calculated as markup divided by the cost of the goods.

Selling Price

The amount of money for which a product is sold to the customer; it may include costs such as manufacturing, distribution, and markup.