Exam 12: The Business Cycle, Inflation, and Deflation

The monetarist theory of the business cycle regards ________ as the factor that leads to business cycles.

According to the real business cycle theory, a technology shock that decreases the demand for loanable funds will ________ employment and will ________ real GDP.

According to the real business cycle theory, a fall in the real interest rate ________ current labor supply and ________ current employment.

Suppose that a severe shock that decreases the demand for loanable funds hits the United States. Which of the following can we expect to occur according to the real business cycle model?

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. If inflation expectations remain unchanged, the current unemployment rate is

-Which of the above figures show how inflation can start in an economy?

"Shoe Industry under Pressure Amid Rising Costs" Rising costs have forced about 15 per cent of shoe manufacturers in a major south China industrial centre to shut down or relocate in the past year... [the firms have] identified rising wages as a key factor behind the closures and relocations from Dongguan...The problems in the footwear industry reflect broader issues affecting manufacturers across China's Pearl River Delta..." Www)ft.com, 2/26/2008 Using an AS/AD framework to describe the events in the story, there would be a

Evidence indicates that a recession occurs at about the same time as a decrease in investment. According to the real business cycle theory, the decrease in investment is attributable to

Stagflation occurs when the price level ________ and real GDP ________.

Which of the following is the factor that leads to business cycles in the new classical business cycle theory?

-In the above figure, what factor might have led to the shift in the short-run Phillips curve from SRPC₁ to SRPC₂?

A rise in the price level because of an increase in the money wage rate

Which of the following pieces of evidence is most consistent with the real business cycle theory?

Suppose oil prices rise and short-run aggregate supply decreases. If the Fed responds by increasing the quantity of money, then in the short run

A decrease in the natural unemployment rate shifts the long-run Phillips curve ________ and ________ the short-run Phillips curve.

During a deflation, the nominal interest rate is ________ and the velocity of circulation ________.

Which of the following could start a demand-pull inflation?

The Phillips curve describes the relationship between real GDP and inflation.

In Figure B above, which of the following is being held constant while moving along the curve in the figure?

The factor that leads to business cycle events within real business cycle theory is represented by