Suppose the Public Expects a 7 Percent Inflation Rate, and Both

question 60

Multiple Choice

Suppose the public expects a 7 percent inflation rate, and both the money supply and money demand grow at 7 percent a year. The Federal Reserve decides to keep the the money growth rate to be 7 percent. In the short run, we expect that investment spending by firms will ________ and consumer durable spending will ________.

• A) increase; decrease
• B) decrease; increase
• C) increase; increase
• D) None of the above; there will be no change in the level of investment spending by firms and consumer durable spending by households.

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Definitions:

Gonorrhea

A sexually transmitted infection caused by the Neisseria gonorrhoeae bacterium.

Heterosexual

Attraction to and sexual relations between individuals of the opposite sex.

Gamete

A mature haploid male or female germ cell that is able to unite with another of the opposite sex in sexual reproduction to form a zygote.

Condom

A contraceptive device usually made of latex or polyurethane, worn on the penis or inserted into the vagina to prevent pregnancy and reduce the risk of sexually transmitted infections.