Question 1

"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in

Accepted Answer

A)  personal tax rates. 
B)  investment spending. 
C)  the real interest rate. 
D)  consumer demand for goods. 
A)  personal tax rates. 
B)  investment spending. 
C)  the real interest rate. 
D)  consumer demand for goods.

Question 2

The short-run Phillips curve shows the relationship between

Accepted Answer

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

Question 3

Inflation can be started by

Accepted Answer

A)  a decrease in aggregate supply or a decrease in aggregate demand. 
B)  a decrease in aggregate supply or an increase in aggregate demand. 
C)  an increase in aggregate supply or an increase in aggregate demand. 
D)  an increase in aggregate supply or a decrease in aggregate demand. 
A)  a decrease in aggregate supply or a decrease in aggregate demand. 
B)  a decrease in aggregate supply or an increase in aggregate demand. 
C)  an increase in aggregate supply or an increase in aggregate demand. 
D)  an increase in aggregate supply or a decrease in aggregate demand.

Question 4

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

Accepted Answer

A)  new classical cycle theory 
B)  new Keynesian cycle theory 
C)  real business cycle theory 
D)  Both answers A and B are correct. 
A)  new classical cycle theory 
B)  new Keynesian cycle theory 
C)  real business cycle theory 
D)  Both answers A and B are correct.

Question 5

Critics of the real business cycle model argue that

Accepted Answer

A)  investment spending is strongly related to the real interest rate. 
B)  labor supply is only weakly related to the real interest rate. 
C)  investment spending is only weakly related to the real interest rate. 
D)  labor supply is very strongly related to the real interest rate. 
A)  investment spending is strongly related to the real interest rate. 
B)  labor supply is only weakly related to the real interest rate. 
C)  investment spending is only weakly related to the real interest rate. 
D)  labor supply is very strongly related to the real interest rate.

Question 6

Which theory assumes that business cycles occur because of changes in business confidence?

Accepted Answer

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

Question 7

Demand-pull inflation can start when

Accepted Answer

A)  the money wage rate rises but the price level does not change. 
B)  the money wage rate rises faster than the price level. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  the aggregate demand curve shifts rightward. 
A)  the money wage rate rises but the price level does not change. 
B)  the money wage rate rises faster than the price level. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  the aggregate demand curve shifts rightward.

Question 8

A Phillips curve shows the relationship between the

Accepted Answer

A)  price level and real GDP. 
B)  unemployment rate and real GDP. 
C)  inflation rate and the unemployment rate. 
D)  inflation rate and real GDP. 
A)  price level and real GDP. 
B)  unemployment rate and real GDP. 
C)  inflation rate and the unemployment rate. 
D)  inflation rate and real GDP.

Question 9

In the short run, if there is an increase in the money wage rate, then

Accepted Answer

A)  short-run aggregate supply increases and the price level rises. 
B)  short-run aggregate supply decreases and the price level rises. 
C)  aggregate demand decreases and the price level falls. 
D)  aggregate demand increases and the price level rises. 
A)  short-run aggregate supply increases and the price level rises. 
B)  short-run aggregate supply decreases and the price level rises. 
C)  aggregate demand decreases and the price level falls. 
D)  aggregate demand increases and the price level rises.

Question 10

A story from www.ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy noted that "Ireland's story is unique: a small, English-speaking, non-industrialized country on the edge of Europe was able to secure structural funds from the EU, cut taxes, deregulate faster than its neighbours and attract lots of foreign companies in the process." If the natural rate of unemployment in Ireland decreased as a result of these policies, then ________ would shift ________.

Accepted Answer

A)  the long-run and short-run Phillips curves; rightward 
B)  the long-run and short-run Phillips curves; leftward 
C)  only the long-run Phillips curve; leftward 
D)  only the short-run Phillips curve; rightward 
A)  the long-run and short-run Phillips curves; rightward 
B)  the long-run and short-run Phillips curves; leftward 
C)  only the long-run Phillips curve; leftward 
D)  only the short-run Phillips curve; rightward

Question 11

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is ________ percent and the expected inflation rate is ________ percent a year.

Accepted Answer

A)  6; 6 
B)  6; 10 
C)  4; 6 
D)  6; 4 
A)  6; 6 
B)  6; 10 
C)  4; 6 
D)  6; 4

Question 12

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

Accepted Answer

A)  exceed 1.5 percent. 
B)  equal 1.5 percent because the actual inflation rate must equal the expected inflation rate. 
C)  be less than 1.5 percent. 
D)  None of the above answers are correct because there is no relationship between the actual inflation rate and aggregate demand. 
A)  exceed 1.5 percent. 
B)  equal 1.5 percent because the actual inflation rate must equal the expected inflation rate. 
C)  be less than 1.5 percent. 
D)  None of the above answers are correct because there is no relationship between the actual inflation rate and aggregate demand.

Question 13

Compare and contrast the Keynesian and Monetarist business cycle theories.

Accepted Answer

Both theories are centered about changes

Question 14

-In the above figure, if the economy moves from point A to point E

Accepted Answer

A)  money wage rates have increased. 
B)  there may have been demand-pull inflation. 
C)  there has been economic growth. 
D)  Both answers A and B are correct. 
A)  money wage rates have increased. 
B)  there may have been demand-pull inflation. 
C)  there has been economic growth. 
D)  Both answers A and B are correct.

Question 15

Increases in the quantity of money can create demand-pull inflation.

Accepted Answer

A) True 
 B)False

Question 16

A criticism of the real business cycle (RBC) theory is that

Accepted Answer

A)  the money wage rate is flexible. 
B)  potential GDP does not vary with changes in the quantity of money. 
C)  productivity fluctuations might be caused by the business cycle. 
D)  All of the above answers are correct. 
A)  the money wage rate is flexible. 
B)  potential GDP does not vary with changes in the quantity of money. 
C)  productivity fluctuations might be caused by the business cycle. 
D)  All of the above answers are correct.

Question 17

Cost-push inflation might initially result from

Accepted Answer

A)  an increase in the quantity of money. 
B)  the use of new technology. 
C)  an increase in government expenditure. 
D)  an increase in the cost of resources. 
A)  an increase in the quantity of money. 
B)  the use of new technology. 
C)  an increase in government expenditure. 
D)  an increase in the cost of resources.

Question 18

The new Keynesian cycle theory views only anticipated changes in aggregate demand as the source of business cycle economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 19

According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion?
I. an unexpected increase in the quantity of money
II. an expected increase in the quantity of money
III. an expected increase in government expenditure

Accepted Answer

A)  I only 
B)  II and III 
C)  I, II and III 
D)  None of the three will trigger an expansion. 
A)  I only 
B)  II and III 
C)  I, II and III 
D)  None of the three will trigger an expansion.

Question 20

For a persistent demand-pull inflation to occur, government expenditure must persistently increase.

Accepted Answer

A) True 
 B)False

"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in

The short-run Phillips curve shows the relationship between

Inflation can be started by

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

Critics of the real business cycle model argue that

Which theory assumes that business cycles occur because of changes in business confidence?

Demand-pull inflation can start when

A Phillips curve shows the relationship between the

In the short run, if there is an increase in the money wage rate, then

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is percent and the expected inflation rate is percent a year.

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

Compare and contrast the Keynesian and Monetarist business cycle theories.

-In the above figure, if the economy moves from point A to point E

Increases in the quantity of money can create demand-pull inflation.

A criticism of the real business cycle (RBC) theory is that

Cost-push inflation might initially result from

The new Keynesian cycle theory views only anticipated changes in aggregate demand as the source of business cycle economic fluctuations.

According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion? I. an unexpected increase in the quantity of money II. an expected increase in the quantity of money III. an expected increase in government expenditure

For a persistent demand-pull inflation to occur, government expenditure must persistently increase.

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

"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in

The short-run Phillips curve shows the relationship between

Inflation can be started by

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

Critics of the real business cycle model argue that

Which theory assumes that business cycles occur because of changes in business confidence?

Demand-pull inflation can start when

A Phillips curve shows the relationship between the

In the short run, if there is an increase in the money wage rate, then

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is ________ percent and the expected inflation rate is ________ percent a year.

The Cleveland Federal Reserve Bank's estimate of expected inflation in 2013 is 1.5 percent. In 2013, if aggregate demand grows faster than expected, the actual inflation rate will

Compare and contrast the Keynesian and Monetarist business cycle theories.

-In the above figure, if the economy moves from point A to point E

Increases in the quantity of money can create demand-pull inflation.

A criticism of the real business cycle (RBC) theory is that

Cost-push inflation might initially result from

The new Keynesian cycle theory views only anticipated changes in aggregate demand as the source of business cycle economic fluctuations.

According to the new Keynesian cycle theory of the business cycle, which of the following can trigger a business cycle expansion? I. an unexpected increase in the quantity of money II. an expected increase in the quantity of money III. an expected increase in government expenditure

For a persistent demand-pull inflation to occur, government expenditure must persistently increase.

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 figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. The natural unemployment rate is percent and the expected inflation rate is percent a year.