Question 1

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is represented by

Accepted Answer

A)  sticky money wage rates. 
B)  rational expectations based on complete information. 
C)  changes in the growth rate of productivity. 
D)  None of the above answers is correct. 
A)  sticky money wage rates. 
B)  rational expectations based on complete information. 
C)  changes in the growth rate of productivity. 
D)  None of the above answers is correct.

Question 2

"The short-run Phillips curve shows the relationship between real GDP and inflation." Is the previous statement correct or incorrect? Briefly explain you answer.

Accepted Answer

The statement is incorrect. Th

Question 3

The long-run Phillips curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 4

In a cost-push inflation,

Accepted Answer

A)  increases in AD lead to increases in SAS. 
B)  decreases in AD lead to increases in SAS. 
C)  increases in SAS lead to decreases in AD. 
D)  decreases in SAS lead to increases in AD. 
A)  increases in AD lead to increases in SAS. 
B)  decreases in AD lead to increases in SAS. 
C)  increases in SAS lead to decreases in AD. 
D)  decreases in SAS lead to increases in AD.

Question 5

The start of a cost-push inflation results in

Accepted Answer

A)  falling GDP and falling unemployment rate. 
B)  raising GDP and rising unemployment rate. 
C)  falling GDP and rising unemployment rate. 
D)  raising GDP and falling unemployment rate. 
A)  falling GDP and falling unemployment rate. 
B)  raising GDP and rising unemployment rate. 
C)  falling GDP and rising unemployment rate. 
D)  raising GDP and falling unemployment rate.

Question 6

Which of the following is the factor that creates business cycles in the real business cycle theory?

Accepted Answer

A)  an unexpected change in aggregate demand 
B)  a change by the Fed in the growth rate of the quantity of money 
C)  a change in expectations about future sales and profits 
D)  a change in the growth rate of productivity 
A)  an unexpected change in aggregate demand 
B)  a change by the Fed in the growth rate of the quantity of money 
C)  a change in expectations about future sales and profits 
D)  a change in the growth rate of productivity

Question 7

An increase in the price of a resource such as oil
I. shifts the aggregate demand curve leftward.
II. shifts the long-run aggregate supply curve rightward.
III. shifts the short-run aggregate supply curve leftward.
IV. increases the price level and decreases real GDP in the short run.

Accepted Answer

A)  Only I is correct. 
B)  Both I and II are correct. 
C)  Only III is correct. 
D)  Both III and IV are correct. 
A)  Only I is correct. 
B)  Both I and II are correct. 
C)  Only III is correct. 
D)  Both III and IV are correct.

Question 8

-The figure above shows the initial aggregate demand curve, AD0, the initial short-run aggregate supply curve, SAS0, and the long-run aggregate supply curve, LAS. The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium. The economy is initially at point A. Then, Atlantia's oil producers form a price-fixing organization and increase the price of oil. Suppose that potential GDP does not change and that Atlantia's Central Bank takes no action. Draw the new aggregate demand and short-run aggregate supply curves in the figure to show the effects of this event on Atlantia's real GDP and price level.
a) What happens to aggregate supply and aggregate demand?
b) What are the new equilibrium real GDP and price level?
c) Will the rise in the price of oil lead to inflation in Atlantia? Why or why not?

Accepted Answer

@#IMG-DLM& a) See the figure above. The increase i

Question 9

Stagflation is characterized by

Accepted Answer

A)  an increase in both output and the price level. 
B)  a decrease in output and the price level. 
C)  an increase in the unemployment rate and an increase in the price level. 
D)  an economy which is growing at a rate equal to its historical average growth rate. 
A)  an increase in both output and the price level. 
B)  a decrease in output and the price level. 
C)  an increase in the unemployment rate and an increase in the price level. 
D)  an economy which is growing at a rate equal to its historical average growth rate.

Question 10

The real business cycle theory asserts that changes in ________ lead to changes in ________.

Accepted Answer

A)  the quantity of money; real GDP 
B)  technology; productivity 
C)  animal spirits; real GDP 
D)  consumption expenditure; real GDP 
A)  the quantity of money; real GDP 
B)  technology; productivity 
C)  animal spirits; real GDP 
D)  consumption expenditure; real GDP

Question 11

Which of the following is NOT one of the criticisms of real business cycle theory?

Accepted Answer

A)  The money wage rate is sticky in the short run. 
B)  Inter-temporal substitution is too weak. 
C)  Productivity fluctuations are the result of the business cycle, not the cause of business cycles. 
D)  The theory is built on weak microeconomic foundations. 
A)  The money wage rate is sticky in the short run. 
B)  Inter-temporal substitution is too weak. 
C)  Productivity fluctuations are the result of the business cycle, not the cause of business cycles. 
D)  The theory is built on weak microeconomic foundations.

Question 12

Using the monetarist model, place the following events in the order in which they occur in a business cycle.
I. Money wages fall and the SAS curve shifts rightward.
II. The Federal Reserve decreases the growth rate of the quantity of money.
III. The AD curve shifts leftward.

Accepted Answer

A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  The events are not part of a monetarist model of the business cycle. 
A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  The events are not part of a monetarist model of the business cycle.

Question 13

What does the short-run Phillips curve indicate about the relationship between inflation and unemployment?

Accepted Answer

Because the slope of the short-run Phill

Question 14

The long-run Phillips curve shows that in the long run, policymakers can

Accepted Answer

A)  lower unemployment if they are willing to accept more inflation forever. 
B)  lower inflation if they are willing to accept higher unemployment forever. 
C)  choose the unemployment rate but not the inflation rate. 
D)  lower inflation without increasing unemployment. 
A)  lower unemployment if they are willing to accept more inflation forever. 
B)  lower inflation if they are willing to accept higher unemployment forever. 
C)  choose the unemployment rate but not the inflation rate. 
D)  lower inflation without increasing unemployment.

Question 15

Explain how the short-run and long-run Phillips curves are related.

Accepted Answer

The short-run Phillips curve is the rela

Question 16

"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
As the same pressures affect other industries across China, we expect to see

Accepted Answer

A)  demand-pull inflation. 
B)  a combination of cost-push and demand-pull inflation. 
C)  cost-push inflation. 
D)  a downward movement along the short-run Phillips curve. 
A)  demand-pull inflation. 
B)  a combination of cost-push and demand-pull inflation. 
C)  cost-push inflation. 
D)  a downward movement along the short-run Phillips curve.

Question 17

Suppose that forecasters have incorrectly estimated aggregate demand. According to the ________, this mistake could trigger a business cycle.

Accepted Answer

A)  Keynesian cycle model 
B)  monetarist cycle model 
C)  new classical cycle model 
D)  real business cycle model 
A)  Keynesian cycle model 
B)  monetarist cycle model 
C)  new classical cycle model 
D)  real business cycle model

Question 18

Which of the following is NOT a potential start of a demand-pull inflation?

Accepted Answer

A)  an increase in the quantity of money 
B)  an increase in government expenditure 
C)  an increase in taxes 
D)  an increase in exports 
A)  an increase in the quantity of money 
B)  an increase in government expenditure 
C)  an increase in taxes 
D)  an increase in exports

Question 19

In late 2008, Great Britain's inflation rate fell from 5.2 percent to 4.5 percent while unemployment was increased from 5.4 percent to 6 percent. These changes would be shown as a

Accepted Answer

A)  leftward shift of the long-run Phillips curve. 
B)  movement up along the short-run Phillips curve. 
C)  movement down the short-run Phillips curve. 
D)  rightward shift of the long-run Phillips curve. 
A)  leftward shift of the long-run Phillips curve. 
B)  movement up along the short-run Phillips curve. 
C)  movement down the short-run Phillips curve. 
D)  rightward shift of the long-run Phillips curve.

Question 20

The new Keynesian cycle theory of the business cycle regards ________ as the main source of economic fluctuations.

Accepted Answer

A)  only unexpected fluctuations in aggregate demand 
B)  expected and unexpected fluctuations in aggregate demand 
C)  only expected fluctuations in aggregate demand 
D)  changes in business confidence 
A)  only unexpected fluctuations in aggregate demand 
B)  expected and unexpected fluctuations in aggregate demand 
C)  only expected fluctuations in aggregate demand 
D)  changes in business confidence

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is represented by

"The short-run Phillips curve shows the relationship between real GDP and inflation." Is the previous statement correct or incorrect? Briefly explain you answer.

The long-run Phillips curve slopes downward.

In a cost-push inflation,

The start of a cost-push inflation results in

Which of the following is the factor that creates business cycles in the real business cycle theory?

An increase in the price of a resource such as oil I. shifts the aggregate demand curve leftward. II. shifts the long-run aggregate supply curve rightward. III. shifts the short-run aggregate supply curve leftward. IV. increases the price level and decreases real GDP in the short run.

Stagflation is characterized by

The real business cycle theory asserts that changes in lead to changes in .

Which of the following is NOT one of the criticisms of real business cycle theory?

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I. Money wages fall and the SAS curve shifts rightward. II. The Federal Reserve decreases the growth rate of the quantity of money. III. The AD curve shifts leftward.

What does the short-run Phillips curve indicate about the relationship between inflation and unemployment?

The long-run Phillips curve shows that in the long run, policymakers can

Explain how the short-run and long-run Phillips curves are related.

Suppose that forecasters have incorrectly estimated aggregate demand. According to the ________, this mistake could trigger a business cycle.

Which of the following is NOT a potential start of a demand-pull inflation?

In late 2008, Great Britain's inflation rate fell from 5.2 percent to 4.5 percent while unemployment was increased from 5.4 percent to 6 percent. These changes would be shown as a

The new Keynesian cycle theory of the business cycle regards ________ as the main source of economic fluctuations.

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

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is represented by

"The short-run Phillips curve shows the relationship between real GDP and inflation." Is the previous statement correct or incorrect? Briefly explain you answer.

The long-run Phillips curve slopes downward.

In a cost-push inflation,

The start of a cost-push inflation results in

Which of the following is the factor that creates business cycles in the real business cycle theory?

An increase in the price of a resource such as oil I. shifts the aggregate demand curve leftward. II. shifts the long-run aggregate supply curve rightward. III. shifts the short-run aggregate supply curve leftward. IV. increases the price level and decreases real GDP in the short run.

Stagflation is characterized by

The real business cycle theory asserts that changes in ________ lead to changes in ________.

Which of the following is NOT one of the criticisms of real business cycle theory?

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I. Money wages fall and the SAS curve shifts rightward. II. The Federal Reserve decreases the growth rate of the quantity of money. III. The AD curve shifts leftward.

What does the short-run Phillips curve indicate about the relationship between inflation and unemployment?

The long-run Phillips curve shows that in the long run, policymakers can

Explain how the short-run and long-run Phillips curves are related.

Suppose that forecasters have incorrectly estimated aggregate demand. According to the ________, this mistake could trigger a business cycle.

Which of the following is NOT a potential start of a demand-pull inflation?

In late 2008, Great Britain's inflation rate fell from 5.2 percent to 4.5 percent while unemployment was increased from 5.4 percent to 6 percent. These changes would be shown as a

The new Keynesian cycle theory of the business cycle regards ________ as the main source of economic fluctuations.

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

The real business cycle theory asserts that changes in lead to changes in .