Exam 12: The Business Cycle, Inflation, and Deflation

Real business cycle economists claim that the intertemporal substitution effect

Demand pull inflation can be started by

A leftward shift in the short run aggregate supply curve

The position of the long-run Phillips curve is determined by

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point ________ and to point ________.

-In the above figure, suppose that the economy has moved from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve.

The anticipated inflation rate is 5 percent. In order for purchasing power to remain constant, the money wage rate must rise by

By itself, an increase in aggregate demand increases GDP by the least amount in the

Cost-push inflation can start with

The initial factors that can create a cost-push inflation do NOT include

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

Stagflation results from

-An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. If the expected inflation rate becomes 8 percent per year, then the

Which theory views fluctuations in productivity as the main source of business cycle fluctuations?

Monetarists believe in changes in animal spirits are the factor that leads to business cycles.

Using the Phillips curves, what are the short-run and long-run effects of a decrease in the inflation rate?

Suppose the velocity of circulation increases by 4 percent and potential GDP grows by 3 percent. The trend inflation rate will equal zero if the quantity of money grows by

If the natural unemployment rate increases, then the short-run Phillips curve shifts ________ and the long-run Phillips curve shifts ________.

When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand