Question 1

"The long-run Phillips curve is vertical at the expected inflation rate." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect bec

Question 2

By itself, a supply shock such as an increase in the price of oil, will

Accepted Answer

A)  cause real GDP to permanently decrease year after year. 
B)  not cause inflation if there is no policy response. 
C)  be inflationary as long as there is no policy response. 
D)  cause a wage-price spiral. 
A)  cause real GDP to permanently decrease year after year. 
B)  not cause inflation if there is no policy response. 
C)  be inflationary as long as there is no policy response. 
D)  cause a wage-price spiral.

Question 3

Movements upward along the short-run Phillips curve result from

Accepted Answer

A)  expected increases in the inflation rate. 
B)  unexpected increases in the inflation rate. 
C)  expected decreases in the inflation rate. 
D)  unexpected decreases in the inflation rate. 
A)  expected increases in the inflation rate. 
B)  unexpected increases in the inflation rate. 
C)  expected decreases in the inflation rate. 
D)  unexpected decreases in the inflation rate.

Question 4

When the expected inflation rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

Accepted Answer

When the expected inflation rate changes

Question 5

During a deflation, investment ________ and the growth rate of potential GDP ________.

Accepted Answer

A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases 
A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases

Question 6

If the prices of crucial raw materials increase

Accepted Answer

A)  the short-run aggregate supply curve shifts leftward. 
B)  stagflation could occur. 
C)  a cost-push inflation could occur depending on the behavior of the Federal Reserve. 
D)  All of the above answers are correct. 
A)  the short-run aggregate supply curve shifts leftward. 
B)  stagflation could occur. 
C)  a cost-push inflation could occur depending on the behavior of the Federal Reserve. 
D)  All of the above answers are correct.

Question 7

Define and describe the short-run Phillips curve.

Accepted Answer

The short-run Phillips curve shows the r

Question 8

According to the real business cycle theory, workers' decisions to work now versus later depend on

Accepted Answer

A)  the real wage rate today but not the real wage rate in the future. 
B)  the money wage rate. 
C)  the real interest rate. 
D)  labor productivity. 
A)  the real wage rate today but not the real wage rate in the future. 
B)  the money wage rate. 
C)  the real interest rate. 
D)  labor productivity.

Question 9

Which of the following statements about a cost-push inflation is CORRECT?

Accepted Answer

A)  Cost-push inflation starts when an increase in aggregate demand "pushes" costs higher. 
B)  Cost-push inflation might start with a rise in the price of raw materials, but it requires increases in the quantity of money to persist. 
C)  To persist, cost-push inflation needs a continual series of cost hikes with no change in aggregate demand. 
D)  The United States has never experienced a cost-push inflation. 
A)  Cost-push inflation starts when an increase in aggregate demand "pushes" costs higher. 
B)  Cost-push inflation might start with a rise in the price of raw materials, but it requires increases in the quantity of money to persist. 
C)  To persist, cost-push inflation needs a continual series of cost hikes with no change in aggregate demand. 
D)  The United States has never experienced a cost-push inflation.

Question 10

Real business cycle theory explains the business cycle as the result of

Accepted Answer

A)  excess growth of the quantity of money. 
B)  unstable investment demand. 
C)  shocks to consumer spending habits. 
D)  fluctuations in productivity. 
A)  excess growth of the quantity of money. 
B)  unstable investment demand. 
C)  shocks to consumer spending habits. 
D)  fluctuations in productivity.

Question 11

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

Accepted Answer

A)  SAS curve shifts rightward. 
B)  LAS curve shifts rightward. 
C)  SAS curve shifts leftward. 
D)  LAS curve shifts leftward. 
A)  SAS curve shifts rightward. 
B)  LAS curve shifts rightward. 
C)  SAS curve shifts leftward. 
D)  LAS curve shifts leftward.

Question 12

Deflation can start with

Accepted Answer

A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  a decrease in aggregate supply. 
D)  Both answers B and C are correct. 
A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  a decrease in aggregate supply. 
D)  Both answers B and C are correct.

Question 13

-In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will then start to

Accepted Answer

A)  rise because a labor shortage now exists. 
B)  fall because a labor shortage now exists. 
C)  rise because a labor surplus now exists. 
D)  fall because a labor surplus now exists. 
A)  rise because a labor shortage now exists. 
B)  fall because a labor shortage now exists. 
C)  rise because a labor surplus now exists. 
D)  fall because a labor surplus now exists.

Question 14

The Keynesian explanation of the business cycle is based on

Accepted Answer

A)  the inability of government policy-makers to predict the future course of the economy. 
B)  shifts in monetary policy undertaken by the Federal Reserve. 
C)  fluctuations in business confidence. 
D)  unstable inflationary expectations. 
A)  the inability of government policy-makers to predict the future course of the economy. 
B)  shifts in monetary policy undertaken by the Federal Reserve. 
C)  fluctuations in business confidence. 
D)  unstable inflationary expectations.

Question 15

Which of the following is TRUE regarding the monetarist theory of the business cycle?
I. Monetarists assume that the quantity of money increases at a constant rate.
II. Fluctuations in interest rates cause business cycles.
III. Changes in the growth rate of the quantity of money affect aggregate demand.

Accepted Answer

A)  I only 
B)  III only 
C)  I and II 
D)  II and III 
A)  I only 
B)  III only 
C)  I and II 
D)  II and III

Question 16

Initially, demand-pull inflation will

Accepted Answer

A)  increase the price level and not change real GDP. 
B)  increase the price level and increase real GDP. 
C)  increase the price level and decrease real GDP. 
D)  shift the aggregate supply curve rightward. 
A)  increase the price level and not change real GDP. 
B)  increase the price level and increase real GDP. 
C)  increase the price level and decrease real GDP. 
D)  shift the aggregate supply curve rightward.

Question 17

The long-run Phillips curve shows the relationship between

Accepted Answer

A)  the price level and real GDP in the long run. 
B)  the price level and unemployment in the long run. 
C)  inflation and unemployment when expected inflation equals the actual inflation. 
D)  inflation and unemployment when expected inflation does not change. 
A)  the price level and real GDP in the long run. 
B)  the price level and unemployment in the long run. 
C)  inflation and unemployment when expected inflation equals the actual inflation. 
D)  inflation and unemployment when expected inflation does not change.

Question 18

During a deflation, the price level is

Accepted Answer

A)  negative. 
B)  positive and rising. 
C)  positive and falling. 
D)  positive and not changing. 
A)  negative. 
B)  positive and rising. 
C)  positive and falling. 
D)  positive and not changing.

Question 19

Which of the following would shift the aggregate demand curve leftward year after year?

Accepted Answer

A)  a one-time tax cut 
B)  a one-time increase in government expenditures on goods and services 
C)  inflation 
D)  negative growth in the quantity of money 
A)  a one-time tax cut 
B)  a one-time increase in government expenditures on goods and services 
C)  inflation 
D)  negative growth in the quantity of money

Question 20

Suppose that in response to a decrease in real interest rates, a person decides to reduce his labor supply today and increase it in the future. This behavior is most consistent with the

Accepted Answer

A)  new classical theory of the business cycle. 
B)  Keynesian theory of the business cycle. 
C)  new Keynesian theory of the business cycle. 
D)  real business cycle theory. 
A)  new classical theory of the business cycle. 
B)  Keynesian theory of the business cycle. 
C)  new Keynesian theory of the business cycle. 
D)  real business cycle theory.

"The long-run Phillips curve is vertical at the expected inflation rate." Is the previous statement correct or incorrect?

By itself, a supply shock such as an increase in the price of oil, will

Movements upward along the short-run Phillips curve result from

When the expected inflation rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

During a deflation, investment and the growth rate of potential GDP .

If the prices of crucial raw materials increase

Define and describe the short-run Phillips curve.

According to the real business cycle theory, workers' decisions to work now versus later depend on

Which of the following statements about a cost-push inflation is CORRECT?

Real business cycle theory explains the business cycle as the result of

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

Deflation can start with

-In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will then start to

The Keynesian explanation of the business cycle is based on

Initially, demand-pull inflation will

The long-run Phillips curve shows the relationship between

During a deflation, the price level is

Which of the following would shift the aggregate demand curve leftward year after year?

Suppose that in response to a decrease in real interest rates, a person decides to reduce his labor supply today and increase it in the future. This behavior is most consistent with the

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

"The long-run Phillips curve is vertical at the expected inflation rate." Is the previous statement correct or incorrect?

By itself, a supply shock such as an increase in the price of oil, will

Movements upward along the short-run Phillips curve result from

When the expected inflation rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

During a deflation, investment ________ and the growth rate of potential GDP ________.

If the prices of crucial raw materials increase

Define and describe the short-run Phillips curve.

According to the real business cycle theory, workers' decisions to work now versus later depend on

Which of the following statements about a cost-push inflation is CORRECT?

Real business cycle theory explains the business cycle as the result of

If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

Deflation can start with

-In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will then start to

The Keynesian explanation of the business cycle is based on

Initially, demand-pull inflation will

The long-run Phillips curve shows the relationship between

During a deflation, the price level is

Which of the following would shift the aggregate demand curve leftward year after year?

Suppose that in response to a decrease in real interest rates, a person decides to reduce his labor supply today and increase it in the future. This behavior is most consistent with the

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

During a deflation, investment and the growth rate of potential GDP .