Question 1

Which of the following is held constant when moving along a short-run Phillip's curve?

Accepted Answer

A)  the inflation rate 
B)  the unemployment rate 
C)  the expected inflation rate 
D)  the growth rate of the quantity of money 
A)  the inflation rate 
B)  the unemployment rate 
C)  the expected inflation rate 
D)  the growth rate of the quantity of money

Question 2

During a cost-push inflation spiral, the money wage rate ________ and the quantity of money ________.

Accepted Answer

A)  increases; increases 
B)  increases; does not change 
C)  does not change; increases 
D)  does not change; does not change 
A)  increases; increases 
B)  increases; does not change 
C)  does not change; increases 
D)  does not change; does not change

Question 3

For a cost-push inflation to occur, oil price increases must be accompanied by

Accepted Answer

A)  decreased investment spending. 
B)  lower personal tax rates. 
C)  increases in the quantity of money. 
D)  increases in government expenditures. 
A)  decreased investment spending. 
B)  lower personal tax rates. 
C)  increases in the quantity of money. 
D)  increases in government expenditures.

Question 4

-In the above figure, the movement from point A to B to C to D to E represents

Accepted Answer

A)  demand-pull inflation resulting solely from wage responses to excess labor demand. 
B)  demand-pull inflation resulting from persistent increases in the quantity of money. 
C)  cost-push inflation resulting solely from wage responses to excess labor demand. 
D)  cost-push inflation resulting from persistent increases in the quantity of money. 
A)  demand-pull inflation resulting solely from wage responses to excess labor demand. 
B)  demand-pull inflation resulting from persistent increases in the quantity of money. 
C)  cost-push inflation resulting solely from wage responses to excess labor demand. 
D)  cost-push inflation resulting from persistent increases in the quantity of money.

Question 5

Fluctuations in business confidence is the factor leading to business cycles in the

Accepted Answer

A)  Keynesian cycle theory. 
B)  new Keynesian cycle theory. 
C)  new classical cycle theory. 
D)  monetarist cycle theory. 
A)  Keynesian cycle theory. 
B)  new Keynesian cycle theory. 
C)  new classical cycle theory. 
D)  monetarist cycle theory.

Question 6

The new classical cycle theory views anticipated fluctuations in aggregate demand as the main source of business cycle economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 7

In the Keynesian business cycle theory, business cycles begin with changes in

Accepted Answer

A)  inflation expectations. 
B)  consumer sentiment. 
C)  business confidence. 
D)  the public's expectations about Fed policies. 
A)  inflation expectations. 
B)  consumer sentiment. 
C)  business confidence. 
D)  the public's expectations about Fed policies.

Question 8

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

Accepted Answer

A)  real GDP and the price level will increase in the short run, but the real wage rate will fall. 
B)  real GDP remains at potential GDP. 
C)  real GDP, the price level, and the real wage rate all increase in the short run. 
D)  real GDP remains at potential GDP, there is no change in the price level, and the real wage rate rises in the short run. 
A)  real GDP and the price level will increase in the short run, but the real wage rate will fall. 
B)  real GDP remains at potential GDP. 
C)  real GDP, the price level, and the real wage rate all increase in the short run. 
D)  real GDP remains at potential GDP, there is no change in the price level, and the real wage rate rises in the short run.

Question 9

When a cost-push inflation starts

Accepted Answer

A)  the price level falls and the money wages rises. 
B)  real GDP rises faster than the quantity of money. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  the price level rises and real GDP decreases. 
A)  the price level falls and the money wages rises. 
B)  real GDP rises faster than the quantity of money. 
C)  the short-run aggregate supply curve shifts rightward. 
D)  the price level rises and real GDP decreases.

Question 10

The SAS curve shifts leftward if

Accepted Answer

A)  good weather increases agricultural harvests. 
B)  OPEC reduces world oil prices. 
C)  tax cuts stimulate labor supply. 
D)  the money wage rate increases. 
A)  good weather increases agricultural harvests. 
B)  OPEC reduces world oil prices. 
C)  tax cuts stimulate labor supply. 
D)  the money wage rate increases.

Question 11

A rational expectation is

Accepted Answer

A)  a forecast devoid of all emotions. 
B)  a forecast which perfectly foretells the future. 
C)  the best possible forecast based upon all relevant information. 
D)  the forecast that automatically carries over from past forecasts. 
A)  a forecast devoid of all emotions. 
B)  a forecast which perfectly foretells the future. 
C)  the best possible forecast based upon all relevant information. 
D)  the forecast that automatically carries over from past forecasts.

Question 12

Suppose the velocity of circulation increases by 2 percent and potential GDP grows by 2 percent. The trend inflation rate will equal zero if the quantity of money grows by

Accepted Answer

A)  0 percent. 
B)  2 percent. 
C)  4 percent. 
D)  -2 percent. 
A)  0 percent. 
B)  2 percent. 
C)  4 percent. 
D)  -2 percent.

Question 13

"Inflation Gives Saudis Food for Thought" "My boss sent me back to return the milk - it's too expensive," said the Pakistani driver for a middle-class Saudi family at the checkout counter of the Al-Othaim supermarket. ...Saudi Arabia is enjoying an unprecedented economic boom ...as sectors [have] increased activity to meet the big internal demand."
Www)ft.com, 1/18/2008
The type of inflation described in the story

Accepted Answer

A)  begins with stagflation. 
B)  starts with an increase in aggregate demand. 
C)  is the result of money wage rate spiral. 
D)  starts with a decrease in aggregate demand. 
A)  begins with stagflation. 
B)  starts with an increase in aggregate demand. 
C)  is the result of money wage rate spiral. 
D)  starts with a decrease in aggregate demand.

Question 14

In the short run, an unexpected increase in the inflation rate leads to

Accepted Answer

A)  a higher unemployment rate. 
B)  a decrease in aggregate demand. 
C)  a lower unemployment rate. 
D)  workers thinking the money wage rate has fallen. 
A)  a higher unemployment rate. 
B)  a decrease in aggregate demand. 
C)  a lower unemployment rate. 
D)  workers thinking the money wage rate has fallen.

Question 15

At the start of a cost-push inflation

Accepted Answer

A)  only real GDP changes while the price level remains constant. 
B)  the price level and real GDP both increase. 
C)  the price level rises and real GDP decreases. 
D)  the price level rises and real GDP does not change. 
A)  only real GDP changes while the price level remains constant. 
B)  the price level and real GDP both increase. 
C)  the price level rises and real GDP decreases. 
D)  the price level rises and real GDP does not change.

Question 16

Critics of the real business cycle theory claim that

Accepted Answer

A)  both real and nominal variables change during the business cycle. 
B)  the intertemporal substitution effect is too weak to account for changes in labor supply. 
C)  changes in technology cannot cause economic growth. 
D)  Both answers B and C are correct. 
A)  both real and nominal variables change during the business cycle. 
B)  the intertemporal substitution effect is too weak to account for changes in labor supply. 
C)  changes in technology cannot cause economic growth. 
D)  Both answers B and C are correct.

Question 17

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point

Accepted Answer

A)  B. 
B)  C. 
C)  D. 
D)  E. 
A)  B. 
B)  C. 
C)  D. 
D)  E.

Question 18

Real business cycle theory says that the factor leading to the business cycle is represented by changes in

Accepted Answer

A)  animal spirits. 
B)  the growth rate of the quantity of money. 
C)  only aggregate demand. 
D)  productivity. 
A)  animal spirits. 
B)  the growth rate of the quantity of money. 
C)  only aggregate demand. 
D)  productivity.

Question 19

-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, the government increases its expenditure on goods and services. 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 Atlantia's potential GDP?
b) In the short run, what happens to aggregate supply and aggregate demand?
c) What are the new short-run equilibrium real GDP and price level?
d) In the long run, what happens to the short-run aggregate supply and aggregate demand?
e) What are the new long-run equilibrium real GDP and price level?

Accepted Answer

a) Atlantia's potential GDP is not affec

Question 20

-In the above figure, which of the following curves represents the long-run Phillips curve?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Which of the following is held constant when moving along a short-run Phillip's curve?

During a cost-push inflation spiral, the money wage rate and the quantity of money .

For a cost-push inflation to occur, oil price increases must be accompanied by

-In the above figure, the movement from point A to B to C to D to E represents

Fluctuations in business confidence is the factor leading to business cycles in the

The new classical cycle theory views anticipated fluctuations in aggregate demand as the main source of business cycle economic fluctuations.

In the Keynesian business cycle theory, business cycles begin with changes in

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

When a cost-push inflation starts

The SAS curve shifts leftward if

A rational expectation is

Suppose the velocity of circulation increases by 2 percent and potential GDP grows by 2 percent. The trend inflation rate will equal zero if the quantity of money grows by

In the short run, an unexpected increase in the inflation rate leads to

At the start of a cost-push inflation

Critics of the real business cycle theory claim that

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point

Real business cycle theory says that the factor leading to the business cycle is represented by changes in

-In the above figure, which of the following curves represents the long-run Phillips curve?

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

Which of the following is held constant when moving along a short-run Phillip's curve?

During a cost-push inflation spiral, the money wage rate ________ and the quantity of money ________.

For a cost-push inflation to occur, oil price increases must be accompanied by

-In the above figure, the movement from point A to B to C to D to E represents

Fluctuations in business confidence is the factor leading to business cycles in the

The new classical cycle theory views anticipated fluctuations in aggregate demand as the main source of business cycle economic fluctuations.

In the Keynesian business cycle theory, business cycles begin with changes in

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

When a cost-push inflation starts

The SAS curve shifts leftward if

A rational expectation is

Suppose the velocity of circulation increases by 2 percent and potential GDP grows by 2 percent. The trend inflation rate will equal zero if the quantity of money grows by

In the short run, an unexpected increase in the inflation rate leads to

At the start of a cost-push inflation

Critics of the real business cycle theory claim that

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point

Real business cycle theory says that the factor leading to the business cycle is represented by changes in

-In the above figure, which of the following curves represents the long-run Phillips curve?

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

During a cost-push inflation spiral, the money wage rate and the quantity of money .