Question

32. Inflation has no economic costs as long as it is fully expected. A. False B....

32. Inflation has no economic costs as long as it is fully expected.

A.

False
B.

True

38.

  1. Banks typically lend to firms that have:

    A.

    zero net worth.
    B.

    negative net worth.
    C.

    positive net worth.
    D.

    unstable net worth.

39.

  1. Labor adjustment costs lead to:

    A.

    higher employment.
    B.

    higher unemployment.
    C.

    time bunching.
    D.

    intertemporal substitution.
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Homework Answers

Answer #1

1) True

Inflation has no economic cost as long as it is expected. But if it's realised inflation it will lead to loss in real value of assets and savings and create uncertainty thereby decrease in investment

2)C

Banks typically lends to the firms with positive net-worth. Positive net worth means the asset of firm is greater than its liability. Positive net worth indicates the financial stability of the firm and capacity to survive and altimately capacity to pay back.

3)B

Labour adjustment cost is cost of firm for altering the labour units. Labour adjustment cost increases the overall cost of firm and may lead to higher unemployment.

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