Question 1

If the natural unemployment rate falls

Accepted Answer

A) the short- run Phillips curve shifts rightward. 
B) the long- run Phillips curve shifts rightward and the short- run Phillips curve does not change. 
C) the long- run Phillips curve shifts leftward and the short- run Phillips curve does not change. 
D) the short- run and long- run Phillips curves both shift leftward. 
E) the short- run and long- run Phillips curves both shift rightward. 
A) the short- run Phillips curve shifts rightward. 
B) the long- run Phillips curve shifts rightward and the short- run Phillips curve does not change. 
C) the long- run Phillips curve shifts leftward and the short- run Phillips curve does not change. 
D) the short- run and long- run Phillips curves both shift leftward. 
E) the short- run and long- run Phillips curves both shift rightward.

Question 2

Use the figure below to answer the following question.
   Figure 12.2.1
-Refer to Figure 12.2.1.The figure illustrates an economy initially in equilibrium at the intersection of the SAS0 curve and the AD0 curve.Which of the following shifts the short- run aggregate supply curve from SAS0 to SAS1?

Accepted Answer

A) an increase in the demand for money 
B) a decrease in the money wage rate 
C) an increase in the marginal product of labour 
D) an increase in the price level 
E) an increase in the price of oil 
A) an increase in the demand for money 
B) a decrease in the money wage rate 
C) an increase in the marginal product of labour 
D) an increase in the price level 
E) an increase in the price of oil

Question 3

Suppose the quantity of money is expected to remain unchanged but it actually increases.The price level

Accepted Answer

A) rises and real GDP stays the same. 
B) falls and real GDP increases. 
C) rises and real GDP increases. 
D) rises and real GDP decreases. 
E) falls and real GDP decreases. 
A) rises and real GDP stays the same. 
B) falls and real GDP increases. 
C) rises and real GDP increases. 
D) rises and real GDP decreases. 
E) falls and real GDP decreases.

Question 4

Use the table below to answer the following questions.
Table 12.4.1  
-Refer to Table 12.4.1.The table gives points on a short- run Phillips curve.If the expected inflation rate is 10 percent, and the inflation rate unexpectedly rises to 12 percent, what is the unemployment rate?

Accepted Answer

A) 4 percent 
B) 5 percent 
C) 6 percent 
D) 7 percent 
E) 9 percent 
A) 4 percent 
B) 5 percent 
C) 6 percent 
D) 7 percent 
E) 9 percent

Question 5

According to mainstream business cycle theory, _______ grows at a steady rate and _______ grows at a fluctuating rate.

Accepted Answer

A) aggregate demand; long- run aggregate supply 
B) potential GDP; short- run aggregate supply 
C) short- run aggregate supply; long- run aggregate supply 
D) short- run aggregate supply; aggregate demand 
E) potential GDP; aggregate demand 
A) aggregate demand; long- run aggregate supply 
B) potential GDP; short- run aggregate supply 
C) short- run aggregate supply; long- run aggregate supply 
D) short- run aggregate supply; aggregate demand 
E) potential GDP; aggregate demand

Question 6

At full employment, an increase in the quantity of money ceteris paribus) can start

Accepted Answer

A) demand- pull inflation, as can an increase in government expenditure. 
B) cost- push inflation, but an increase in government expenditure cannot. 
C) demand- pull and a cost- push inflation, as can an increase in government expenditure. 
D) cost- push inflation, as can an increase in government expenditure. 
E) demand- pull inflation, but an increase in government expenditure cannot. 
A) demand- pull inflation, as can an increase in government expenditure. 
B) cost- push inflation, but an increase in government expenditure cannot. 
C) demand- pull and a cost- push inflation, as can an increase in government expenditure. 
D) cost- push inflation, as can an increase in government expenditure. 
E) demand- pull inflation, but an increase in government expenditure cannot.

Question 7

Use the figure below to answer the following questions.
   Figure 12.4.1
-Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.What is the expected inflation rate?

Accepted Answer

A) 9 percent a year 
B) 4 percent a year 
C) 7 percent a year 
D) 2 percent a year 
E) cannot be determined without more information 
A) 9 percent a year 
B) 4 percent a year 
C) 7 percent a year 
D) 2 percent a year 
E) cannot be determined without more information

Question 8

In new classical cycle theory, _______ bring fluctuations in real GDP around potential GDP.

Accepted Answer

A) unexpected changes in aggregate demand 
B) expected changes in labour productivity 
C) expected changes in aggregate demand 
D) fluctuations in investment coupled with rigid wages 
E) fluctuations in money growth with rigid wages 
A) unexpected changes in aggregate demand 
B) expected changes in labour productivity 
C) expected changes in aggregate demand 
D) fluctuations in investment coupled with rigid wages 
E) fluctuations in money growth with rigid wages

Question 9

Use the figure below to answer the following questions.
   Figure 12.4.1
-Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.If the current inflation rate is 4 percent a year, what is the natural unemployment rate?

Accepted Answer

A) 6 percent 
B) 3 percent 
C) 4 percent 
D) 9 percent 
E) cannot be determined without more information 
A) 6 percent 
B) 3 percent 
C) 4 percent 
D) 9 percent 
E) cannot be determined without more information

Question 10

Inflation that starts because aggregate demand increases is called

Accepted Answer

A) anticipated inflation. 
B) cost- push inflation. 
C) demand- pull inflation. 
D) political inflation. 
E) unanticipated inflation. 
A) anticipated inflation. 
B) cost- push inflation. 
C) demand- pull inflation. 
D) political inflation. 
E) unanticipated inflation.

Question 11

Deflation is

Accepted Answer

A) a persistent and ongoing falling price level. 
B) always accompanied by a decrease in the natural unemployment rate. 
C) unknown in the twenty- first century. 
D) always accompanied by an increase in the natural unemployment rate. 
E) a one- time fall in the price level. 
A) a persistent and ongoing falling price level. 
B) always accompanied by a decrease in the natural unemployment rate. 
C) unknown in the twenty- first century. 
D) always accompanied by an increase in the natural unemployment rate. 
E) a one- time fall in the price level.

Question 12

Use the information below to answer the following questions.
Fact 12.4.1
The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to main inflation inside a low target range.Failure to achieve the target would result in the governor of the Bank losing his job.
-Consider Fact 12.4.1.Choose the correct statement.

Accepted Answer

A) The long- run Phillips curve shifts leftward. 
B) The long- run Phillips curve does not change because a change in the expected inflation rate does not shift the long- run Phillips curve. 
C) The long- run Phillips curve shifts rightward. 
D) The long- run Phillips curve was abolished and New Zealand now has only a short- run Phillips curve. 
E) The slope of the long- run Phillips curve changes when the expected inflation rate falls. 
A) The long- run Phillips curve shifts leftward. 
B) The long- run Phillips curve does not change because a change in the expected inflation rate does not shift the long- run Phillips curve. 
C) The long- run Phillips curve shifts rightward. 
D) The long- run Phillips curve was abolished and New Zealand now has only a short- run Phillips curve. 
E) The slope of the long- run Phillips curve changes when the expected inflation rate falls.

Question 13

If the natural unemployment rate rises

Accepted Answer

A) the long- run Phillips curve shifts rightward and the short- run Phillips curve does not change. 
B) the short- run and long- run Phillips curves both shift rightward. 
C) the short- run and long- run Phillips curves both shift leftward. 
D) the long- run Phillips curve shifts leftward and the short- run Phillips curve does not change. 
E) the short- run Phillips curve shifts rightward and the long- run Phillips curve does not change. 
A) the long- run Phillips curve shifts rightward and the short- run Phillips curve does not change. 
B) the short- run and long- run Phillips curves both shift rightward. 
C) the short- run and long- run Phillips curves both shift leftward. 
D) the long- run Phillips curve shifts leftward and the short- run Phillips curve does not change. 
E) the short- run Phillips curve shifts rightward and the long- run Phillips curve does not change.

Question 14

New Keynesian economists believe that _______ is influenced by _______.

Accepted Answer

A) today's money wage rate; today's rational expectations of the price level 
B) yesterday's money wage rate; today's rational expectations of the money wage 
C) today's money wage rate; yesterday's rational expectations of the price level 
D) today's money wage rate; animal spirits 
E) yesterday's rational expectations of the price level; today's money wage rate 
A) today's money wage rate; today's rational expectations of the price level 
B) yesterday's money wage rate; today's rational expectations of the money wage 
C) today's money wage rate; yesterday's rational expectations of the price level 
D) today's money wage rate; animal spirits 
E) yesterday's rational expectations of the price level; today's money wage rate

Question 15

The economy's natural unemployment rate is 4 percent.Table 12.4.2 gives some points on the economy's short- run Phillips curve.If the expected inflation rate rises to 8 percent a year,

Accepted Answer

A) the long- run Phillips curve shifts leftward. 
B) the short- run Phillips curve shifts upward. 
C) the short- run Phillips curve shifts downward. 
D) Both A and B are correct. 
E) Both A and C are correct. 
A) the long- run Phillips curve shifts leftward. 
B) the short- run Phillips curve shifts upward. 
C) the short- run Phillips curve shifts downward. 
D) Both A and B are correct. 
E) Both A and C are correct.

Question 16

Which of the following would cause the aggregate demand curve to keep shifting rightward year after year?

Accepted Answer

A) inflation 
B) excess wage demands 
C) a one- time increase in government expenditures on goods and services 
D) a one- time tax cut 
E) a persistent increase in the quantity of money 
A) inflation 
B) excess wage demands 
C) a one- time increase in government expenditures on goods and services 
D) a one- time tax cut 
E) a persistent increase in the quantity of money

Question 17

Suppose OPEC unexpectedly collapses, which leads to a fall in the price of oil.As a result, the price level

Accepted Answer

A) rises, and real GDP increases. 
B) rises, and real GDP decreases. 
C) falls, and real GDP decreases. 
D) rises, and real GDP remains the same. 
E) falls, and real GDP increases. 
A) rises, and real GDP increases. 
B) rises, and real GDP decreases. 
C) falls, and real GDP decreases. 
D) rises, and real GDP remains the same. 
E) falls, and real GDP increases.

Question 18

Both new Keynesian and new classical cycle theories claim that

Accepted Answer

A) a change in the price of oil is the major cause of a business cycle. 
B) expected changes in the quantity of money can trigger a business cycle. 
C) unexpected changes in aggregate demand trigger a business cycle. 
D) shifts in the SAS curve are the main impulse for a business cycle. 
E) animal spirits can trigger a business cycle. 
A) a change in the price of oil is the major cause of a business cycle. 
B) expected changes in the quantity of money can trigger a business cycle. 
C) unexpected changes in aggregate demand trigger a business cycle. 
D) shifts in the SAS curve are the main impulse for a business cycle. 
E) animal spirits can trigger a business cycle.

Question 19

According to the real business cycle theory, during a recession the demand for labour _______ and the supply of labour _______.

Accepted Answer

A) decreases; increases 
B) decreases; does not change 
C) does not change; decreases 
D) increases; decreases 
E) decreases; decreases 
A) decreases; increases 
B) decreases; does not change 
C) does not change; decreases 
D) increases; decreases 
E) decreases; decreases

Question 20

Use the figure below to answer the following questions.
   Figure 12.1.1
-Refer to Figure 12.1.1.Suppose the economy moves from point A to point C.According to the monetarist theory of the business cycle, what could have caused this movement?

Accepted Answer

A) an increase in the growth rate of the quantity of money 
B) animal spirits 
C) an increase in uncertainty 
D) an increase in the money wage rate 
E) a decrease in the growth rate of the quantity of money 
A) an increase in the growth rate of the quantity of money 
B) animal spirits 
C) an increase in uncertainty 
D) an increase in the money wage rate 
E) a decrease in the growth rate of the quantity of money

If the natural unemployment rate falls

Use the figure below to answer the following question. Figure 12.2.1 -Refer to Figure 12.2.1.The figure illustrates an economy initially in equilibrium at the intersection of the SAS₀ curve and the AD₀curve.Which of the following shifts the short- run aggregate supply curve from SAS₀to SAS₁?

Suppose the quantity of money is expected to remain unchanged but it actually increases.The price level

Use the table below to answer the following questions. Table 12.4.1 -Refer to Table 12.4.1.The table gives points on a short- run Phillips curve.If the expected inflation rate is 10 percent, and the inflation rate unexpectedly rises to 12 percent, what is the unemployment rate?

According to mainstream business cycle theory, _ grows at a steady rate and _ grows at a fluctuating rate.

At full employment, an increase in the quantity of money ceteris paribus) can start

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.What is the expected inflation rate?

In new classical cycle theory, _______ bring fluctuations in real GDP around potential GDP.

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.If the current inflation rate is 4 percent a year, what is the natural unemployment rate?

Inflation that starts because aggregate demand increases is called

Deflation is

If the natural unemployment rate rises

New Keynesian economists believe that _ is influenced by _.

The economy's natural unemployment rate is 4 percent.Table 12.4.2 gives some points on the economy's short- run Phillips curve.If the expected inflation rate rises to 8 percent a year,

Which of the following would cause the aggregate demand curve to keep shifting rightward year after year?

Suppose OPEC unexpectedly collapses, which leads to a fall in the price of oil.As a result, the price level

Both new Keynesian and new classical cycle theories claim that

According to the real business cycle theory, during a recession the demand for labour _ and the supply of labour _.

Use the figure below to answer the following questions. Figure 12.1.1 -Refer to Figure 12.1.1.Suppose the economy moves from point A to point C.According to the monetarist theory of the business cycle, what could have caused this movement?

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 12: The Business Cycle, Inflation, and Deflation

If the natural unemployment rate falls

Use the figure below to answer the following question. Figure 12.2.1 -Refer to Figure 12.2.1.The figure illustrates an economy initially in equilibrium at the intersection of the SAS0 curve and the AD0 curve.Which of the following shifts the short- run aggregate supply curve from SAS0 to SAS1?

Suppose the quantity of money is expected to remain unchanged but it actually increases.The price level

Use the table below to answer the following questions. Table 12.4.1 -Refer to Table 12.4.1.The table gives points on a short- run Phillips curve.If the expected inflation rate is 10 percent, and the inflation rate unexpectedly rises to 12 percent, what is the unemployment rate?

According to mainstream business cycle theory, _______ grows at a steady rate and _______ grows at a fluctuating rate.

At full employment, an increase in the quantity of money ceteris paribus) can start

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.What is the expected inflation rate?

In new classical cycle theory, _______ bring fluctuations in real GDP around potential GDP.

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.If the current inflation rate is 4 percent a year, what is the natural unemployment rate?

Inflation that starts because aggregate demand increases is called

Deflation is

If the natural unemployment rate rises

New Keynesian economists believe that _______ is influenced by _______.

The economy's natural unemployment rate is 4 percent.Table 12.4.2 gives some points on the economy's short- run Phillips curve.If the expected inflation rate rises to 8 percent a year,

Which of the following would cause the aggregate demand curve to keep shifting rightward year after year?

Suppose OPEC unexpectedly collapses, which leads to a fall in the price of oil.As a result, the price level

Both new Keynesian and new classical cycle theories claim that

According to the real business cycle theory, during a recession the demand for labour _______ and the supply of labour _______.

Use the figure below to answer the following questions. Figure 12.1.1 -Refer to Figure 12.1.1.Suppose the economy moves from point A to point C.According to the monetarist theory of the business cycle, what could have caused this movement?

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

According to mainstream business cycle theory, _ grows at a steady rate and _ grows at a fluctuating rate.

New Keynesian economists believe that _ is influenced by _.

According to the real business cycle theory, during a recession the demand for labour _ and the supply of labour _.