2. Determine which scenerios best fits these terms: shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions. (Some scenerios may not go in to any of the categories because 2 categories are missing)
a. john thins his new salary in NYC will increase his standard of living.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
b. a jewelre observes the price of gold rise and wonders if there is a shortage of gold.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
c. Kallie is taking more trips to the ATM now than in the past.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
d. your grandmothers savings account pays 2% interest, but inflation is 5%.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
e. the CEO of GM worries that his revenue revieved in the future wontn cover the expenses he incurs today. (shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
f. Carson is angry because the price of donuts increased from $1 to $2 since last week.(shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
g. Jim is reluctant to sell his stocks at the end of the year. (shoe leather costs, money illusion, menu costs, future price level uncertainty, wealth redistribution, price confusion, and tax distortions)
8. In 2015, the consumer price index (CPI) was 238,000 whereas it was about 100 in 1982. Suppose that one of your parents had a job that paid $28000 in 1982 and a job that paid $60,000 annually in 2015. Relative to 1982, we could say that your parents nominal income (increased, decreased or stayed the same) in 2015 and that your parents real income (increased, decreased or stayed the same).
