In the Short Run, If the Actual Rate of Inflation

question 242

Multiple Choice

In the short run, if the actual rate of inflation falls lower than the expected rate, then

• A) profits will temporarily fall and unemployment will temporarily rise.
• B) profits will temporarily rise and unemployment will temporarily fall.
• C) nominal wages will rise, profits will rise, and unemployment will fall.
• D) nominal wages will fall, profits will fall, and unemployment will rise.

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Definitions:

Uninsured Savings

Savings not protected by government insurance, exposing depositors to potential loss if the financial institution fails.

Reserve Requirement

The minimum amount of reserves a bank must hold against deposits, as mandated by central banking authorities.

Commercial Banks

Financial institutions that provide a range of services, including accepting deposits, providing loans, and offering other financial products.

Bank Failures

The occurrence when a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities.