Exam 28: The Business Cycle, Inflation, and Deflation

Fact 28.4.1 Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly Eurozone unemployment rose to 10.7 percent. At the same time, Eurozone inflation unexpectedly rose to 2.7 percent a year, up from the previous month's 2.6 percent a year. Source: Huffington Post, March 1, 2012 -Consider Fact 28.4.1. Choose the statement that is incorrect about the Eurozone economy.

Table 28.4.1 11)Refer to Table 28.4.1. The table gives points on the short-run Phillips curve for the country of Ruritania. If the expected inflation rate is 10 percent, what is the natural unemployment rate? -Refer to Table 28.4.1. The table gives points on the short-run Phillips curve for the country of Ruritania. If the expected inflation rate is 10 percent, and the inflation rate unexpectedly rises to 12 percent and stays there for some period of time, the expected inflation rate becomes ________ percent and the natural unemployment rate is ________ percent.

Choose the statement that is incorrect.

Figure 28.4.1 Use the figure below to answer the following questions. -Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the current inflation rate is 4 percent, what is the current unemployment rate?

According to ________ theory, a decrease in productivity growth shifts the ________.

Figure 28.1.1 Use the figure below to answer the following questions. -Refer to Figure 28.1.1. Suppose the economy moves from point D to point B. According to the monetarist theory of the business cycle, what could have caused this movement?

Fact 28.4.2 The Reserve Bank of New Zealand signed an agreement with the New Zealand government in which the Bank agreed to maintain inflation inside a low target range. Failure to achieve the target would result in the governor of the Bank losing his job. -Consider Fact 28.4.2. Choose the correct statement.

Figure 28.2.3 Use the figure below to answer the following questions. -Refer to Figure 28.2.3. Assume that the figure illustrates an economy initially in equilibrium at the intersection of the SAS₀ curve and the AD₀ curve. If the aggregate demand curve is expected to remain at AD₀ but shifts to AD₁, the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

If the unemployment rate rises and the inflation rate falls, while the natural unemployment rate and the expected inflation rate remain constant, then we are studying a movement along the

Suppose that a severe shock that decreases the demand for loanable funds hits Canada. Which of the following can we expect to occur according to real business cycle theory?

In real business cycle theory, the supply of labour

Demand-pull inflation can start

Figure 28.2.2 Use the figure below to answer the following questions. -Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run aggregate supply curve shifts leftward from SAS₀ to SAS₁, ceteris paribus, then the actual inflation rate

Which business cycle theory emphasizes that, because of previously negotiated wage agreements, both expected and unexpected fluctuations in aggregate demand can change real GDP?

If there is a fully anticipated increase in the inflation rate,

An economy is in long-run equilibrium when aggregate supply unexpectedly decreases. Then real GDP (ceteris paribus)will be

Figure 28.4.1 Use the figure below to answer the following questions. -Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the expected inflation rate changes to 3 percent, the

According to the real business cycle theory, what effects follow from a change in productivity? I. Investment demand changes. II. The demand for labour changes. III. Government expenditure changes.

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

The short-run Phillips curve shows the relationship between ________, holding constant the expected inflation rate and the natural unemployment rate.