PLEASE ANSWER THESE QUESTIONS WITH THE CORE ECONOMY UNIT 14.8 TO 15.2

QUESTION 1

REPLACE ANSWER BY THE REAL ANSWER

TheANSWER(one word) costs of inflation refer to the fact that firms have to update their prices more frequently than they would prefer.

QUESTION 2

REPLACE ANSWER BY THE REAL ANSWER

A monetary policy regime where the central bank changes interest rates in order to influence aggregate demand is known asANSWER (two words).

QUESTION 3

The following table shows the annual inflation rate (the GDP deflator) of Japan, the UK, China and Nauru in the period 2010-2013 (Source, World Bank):

Labour supply Supply side (medium & long run) Labour productivity A Price-setting curve Real wage Wage-setting curve 8.5 Employment, N Demand side (short run) AD (high) B AD (normal) L AD (low) C Aggregate demand, AD normal recession boom 45 8.5 Output, Y