23.What are the redistributive effects of inflation? 24. What is an example of t

Question

23.What are the redistributive effects of inflation? 24. What is an example of the following: a) a demand theory of the business cyele b) a supply side theory of the business eycle 25. Define the following: a) MPC b) MPS 26. Define the labor force participation rate. 27. Demand-pull inflation can develop when: A) There is a shortage of investment and investors bid up interest rates. B) Inventories shrink and consumers bid up prices. C) There is a surplus of resources and so employers bid up wages D) The left guard pulls on a running play. 28. If the population of a country is 180,000 people, its labor force consists of 95,000 people, and 27,000 people are unemployed, the unemployment rate is: A) 15.0 pereent. B) 28.4 percent. C) 67.8 percent. D) 6.7 pereent 29. After Christmas retail sales fall and many clerks are laid off until the following Christmas. This is an example of which of the following types of unemployment? A) Structural unemployment B) Frictional unemployment. C) Cyelical unemployment. D) Seasonal unemployment.

Explanation / Answer

23. By redistributive effects, we mean that inflation redistributes the income of people. People with a fixed income, like wage earners, lose income because of inflation. They need to pay a higher amount of money to consume the same level of goods and services. Therefore, because of inflation, they lose income. The lost income of the fixed income earner gets redistributed to the businesses which get a higher price for their goods and services. So, their income rises. Therefore, inflation redistribute income.

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