Question 1

According to the real business cycle theory, technological change

Accepted Answer

A)  always increases productivity. 
B)  never increases productivity. 
C)  can initially decrease productivity. 
D)  is caused by changes in productivity. 
A)  always increases productivity. 
B)  never increases productivity. 
C)  can initially decrease productivity. 
D)  is caused by changes in productivity.

Question 2

Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following?

Accepted Answer

A)  a decrease in tax rates 
B)  an increase in the labor force 
C)  a large crop failure that boosts the prices of raw food materials 
D)  an increase in the nation's capital stock 
A)  a decrease in tax rates 
B)  an increase in the labor force 
C)  a large crop failure that boosts the prices of raw food materials 
D)  an increase in the nation's capital stock

Question 3

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

Accepted Answer

A) True 
 B)False

Question 4

The new classical theory argues that the primary factor leading to business cycles are

Accepted Answer

A)  expected changes in aggregate demand. 
B)  expected changes in aggregate supply. 
C)  unexpected changes in aggregate demand. 
D)  unexpected changes in aggregate supply. 
A)  expected changes in aggregate demand. 
B)  expected changes in aggregate supply. 
C)  unexpected changes in aggregate demand. 
D)  unexpected changes in aggregate supply.

Question 5

The term "stagflation" refers to the situation when

Accepted Answer

A)  the aggregate supply curve shifts leftward, prices increase and real GDP decreases. 
B)  real GDP and the price level both rise because of an increase in aggregate demand. 
C)  prices become stagnant and do not increase or decrease. 
D)  the short-run aggregate supply curve and the aggregate demand curve shift in opposite directions. 
A)  the aggregate supply curve shifts leftward, prices increase and real GDP decreases. 
B)  real GDP and the price level both rise because of an increase in aggregate demand. 
C)  prices become stagnant and do not increase or decrease. 
D)  the short-run aggregate supply curve and the aggregate demand curve shift in opposite directions.

Question 6

Which of the following is a criticism of the real business cycle theory?

Accepted Answer

A)  Real business cycle theory fails to explain the phenomenon of economic growth. 
B)  Real business cycle theory assumes that money wage rates are sticky. 
C)  Real business cycle theory believes that productivity changes are caused by technology changes when in fact they are caused by changes in aggregate demand. 
D)  None of the above are criticisms of real business cycle theory. 
A)  Real business cycle theory fails to explain the phenomenon of economic growth. 
B)  Real business cycle theory assumes that money wage rates are sticky. 
C)  Real business cycle theory believes that productivity changes are caused by technology changes when in fact they are caused by changes in aggregate demand. 
D)  None of the above are criticisms of real business cycle theory.

Question 7

One example of cost-push inflation is an increase in

Accepted Answer

A)  the money prices of raw materials followed by no government policy. 
B)  the money prices of raw materials followed by increases in the quantity of money. 
C)  the money prices of raw materials followed by decreases in the quantity of money. 
D)  government expenditure followed by increases in the quantity of money. 
A)  the money prices of raw materials followed by no government policy. 
B)  the money prices of raw materials followed by increases in the quantity of money. 
C)  the money prices of raw materials followed by decreases in the quantity of money. 
D)  government expenditure followed by increases in the quantity of money.

Question 8

Moving along the short-run Phillips curve indicates

Accepted Answer

A)  that higher inflation leads to a higher unemployment rate. 
B)  that higher unemployment leads to a higher inflation rate. 
C)  a tradeoff between inflation and unemployment so that higher inflation is related to lower unemployment. 
D)  that the natural unemployment rate falls when the inflation rate rises. 
A)  that higher inflation leads to a higher unemployment rate. 
B)  that higher unemployment leads to a higher inflation rate. 
C)  a tradeoff between inflation and unemployment so that higher inflation is related to lower unemployment. 
D)  that the natural unemployment rate falls when the inflation rate rises.

Question 9

When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of business cycle fluctuations?

Accepted Answer

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

Question 10

If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be

Accepted Answer

A)  an eventual leftward shift in the short-run aggregate supply curve. 
B)  unemployment below the natural rate. 
C)  upward pressure on money wage rates. 
D)  All of the above answers are correct. 
A)  an eventual leftward shift in the short-run aggregate supply curve. 
B)  unemployment below the natural rate. 
C)  upward pressure on money wage rates. 
D)  All of the above answers are correct.

Question 11

The short-run Phillips curve and the long-run Phillips curve intersect at the ________ and ________.

Accepted Answer

A)  expected inflation rate; the expected unemployment rate 
B)  expected inflation rate; the natural unemployment rate 
C)  natural inflation rate; the expected employment rate 
D)  expected inflation rate; the expected employment rate 
A)  expected inflation rate; the expected unemployment rate 
B)  expected inflation rate; the natural unemployment rate 
C)  natural inflation rate; the expected employment rate 
D)  expected inflation rate; the expected employment rate

Question 12

In the monetarist business cycle theory, increases in money growth temporarily ________ real GDP and ________ the price level.

Accepted Answer

A)  increase; rise 
B)  increase; lower 
C)  decrease; rise 
D)  decrease; lower 
A)  increase; rise 
B)  increase; lower 
C)  decrease; rise 
D)  decrease; lower

Question 13

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

Accepted Answer

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

Question 14

A one-time rise in the price level can turn into a demand-pull inflation when

Accepted Answer

A)  the money wage rate continues to increase. 
B)  the quantity of money persistently decreases. 
C)  taxes consistently increase. 
D)  the quantity of money persistently increases. 
A)  the money wage rate continues to increase. 
B)  the quantity of money persistently decreases. 
C)  taxes consistently increase. 
D)  the quantity of money persistently increases.

Question 15

The short-run Phillips curve

Accepted Answer

A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal. 
D)  is vertical. 
A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal. 
D)  is vertical.

Question 16

In a speech to Asia Pacific Economic Cooperation summit in Peru in November 2008, President Hu of China commented on his country's $586 billion fiscal stimulus plan by saying, "Instead of relying mainly on investment and export we will adopt a coordinated approach that combines consumption, investment and export to boost the economy. And instead of relying heavily on higher consumption of material resources we will achieve development by making scientific and technological progress." If his country's plan works and the expected inflation rate does not change, there will be a

Accepted Answer

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

Question 17

What is the factor that leads to business cycles in the new classical cycle theory?

Accepted Answer

The factor leading to business

Question 18

In a demand-pull inflation, the AD curve shifts ________ and the SAS curve shifts ________.

Accepted Answer

A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward 
A)  rightward; rightward 
B)  rightward; leftward 
C)  leftward; rightward 
D)  leftward; leftward

Question 19

In the real business cycle model, the quantity of money

Accepted Answer

A)  can change the real wage rate. 
B)  can increase the real interest rate. 
C)  has no effect on real GDP. 
D)  can decrease the effect from technology shocks. 
A)  can change the real wage rate. 
B)  can increase the real interest rate. 
C)  has no effect on real GDP. 
D)  can decrease the effect from technology shocks.

Question 20

"The short-run Phillips curve is vertical at the natural unemployment rate." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. Th

According to the real business cycle theory, technological change

Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following?

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

The new classical theory argues that the primary factor leading to business cycles are

The term "stagflation" refers to the situation when

Which of the following is a criticism of the real business cycle theory?

One example of cost-push inflation is an increase in

Moving along the short-run Phillips curve indicates

When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of business cycle fluctuations?

If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be

The short-run Phillips curve and the long-run Phillips curve intersect at the and .

In the monetarist business cycle theory, increases in money growth temporarily real GDP and the price level.

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

A one-time rise in the price level can turn into a demand-pull inflation when

The short-run Phillips curve

What is the factor that leads to business cycles in the new classical cycle theory?

In a demand-pull inflation, the AD curve shifts and the SAS curve shifts .

In the real business cycle model, the quantity of money

"The short-run Phillips curve is vertical at the natural unemployment rate." Is the previous statement correct or incorrect?

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

According to the real business cycle theory, technological change

Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following?

The short-run Phillips curve intersects the long-run Phillips curve at the actual inflation rate.

The new classical theory argues that the primary factor leading to business cycles are

The term "stagflation" refers to the situation when

Which of the following is a criticism of the real business cycle theory?

One example of cost-push inflation is an increase in

Moving along the short-run Phillips curve indicates

When the recession started in 2008, the government estimated that labor productivity for the year was -2.8 percent. This result is most in line with which theory of business cycle fluctuations?

If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be

The short-run Phillips curve and the long-run Phillips curve intersect at the ________ and ________.

In the monetarist business cycle theory, increases in money growth temporarily ________ real GDP and ________ the price level.

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

A one-time rise in the price level can turn into a demand-pull inflation when

The short-run Phillips curve

What is the factor that leads to business cycles in the new classical cycle theory?

In a demand-pull inflation, the AD curve shifts ________ and the SAS curve shifts ________.

In the real business cycle model, the quantity of money

"The short-run Phillips curve is vertical at the natural unemployment rate." Is the previous statement correct or incorrect?

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 short-run Phillips curve and the long-run Phillips curve intersect at the and .

In the monetarist business cycle theory, increases in money growth temporarily real GDP and the price level.

In a demand-pull inflation, the AD curve shifts and the SAS curve shifts .