The Expected Inflation Rate Is Equal to the Actual Inflation

question 110

Multiple Choice

The expected inflation rate is equal to the actual inflation rate.According to the (Friedman) natural rate theory,the economy is

• A) in a recessionary gap.
• B) in an inflationary gap.
• C) at a point on the short-run Phillips curve,but not on the long-run Phillips curve.
• D) biased toward producing a higher percentage of services than goods.
• E) producing Natural Real GDP.

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Definitions:

Trade Credit Terms

Trade credit terms are the conditions agreed upon between a buyer and seller regarding the payment for goods or services, including the repayment period and any discounts for early payment.

Discount

The reduction in the price of goods or services, usually offered to prompt sales or because the product is damaged, outdated, or in less demand.

Restricted Policy

A policy under which holdings of cash, securities, inventories, and receivables are minimized.

Relaxed Policy

A policy under which relatively large amounts of cash, marketable securities, and inventories are carried and under which sales are stimulated by a liberal credit policy, resulting in a high level of receivables.