Exam 12: The Business Cycle, Inflation, and Deflation

During an unanticipated deflation, the real wage rate ________ and employment ________.

-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. Atlantia's Central Bank then increases the quantity of money year after year. Draw the necessary curves in the figure to show the effects of this 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 aggregate supply and aggregate demand? e) In the long run, what process is unfolding?

The real business cycle (RBC) theory argues that the impact of technological change on real GDP is

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the ________ of the business cycle.

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

"The short-run Phillips curve shifts leftward when the inflation rate rises." Is the previous statement correct or incorrect?

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

The price level falls if

Along a short-run Phillips curve, suppose the expected inflation rate is 6 percent. If the actual inflation rate turns out to be 8 percent, then

Suppose that the expected inflation rate is 8 percent and the unemployment rate is 3 percent. If the actual inflation rate rises to 10 percent and the expected inflation rate does not change, then

-In the above figure, the economy is at point A. An increase in oil prices occurs. After the increase in oil prices, the Fed responds by increasing the quantity of money. The economy moves from point A to

In the monetarist business cycle theory, decreasing the growth rate of the quantity of money ________ and increasing the growth rate of the quantity of money ________.

-Suppose the natural unemployment rate is 4 percent and the expected inflation rate is 6 percent. In the above figure, illustrate the long-run Phillips curve. What does the long-run Phillips curve reveal about the long-run tradeoff between inflation and unemployment?

When Japan experienced deflation in the 1990s, Japan's real GDP

Which theory distinguishes between expected and unexpected fluctuations in aggregate demand and argues that only unexpected changes can affect real GDP?

Increases in the quantity of money can start a ________ inflation and an increase in government expenditure can start a ________ inflation.

Stagflation occurs when the

According to the real business cycle theory, a decrease in the real interest rate today increases current labor supply.

When the natural unemployment rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

A demand-pull inflation process consists of ________ shifts in the AD curve and ________ shifts in the SAS curve.