Exam 28: The Business Cycle, Inflation, and Deflation

Fact 28.2.1 High Food and Energy Prices Here to Stay On top of rising energy prices, a severe drought, bad harvests, and a poor monsoon season in Asia have sent grain prices soaring. Globally, this is the third major food price shock in five years. Source: The Telegraph, August 29, 2012 -Consider Fact 28.2.1. The news clip is describing ________ inflation.

When the price level is rising and, simultaneously, real GDP is decreasing,

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 3 percent, what is the current unemployment rate?

In real business cycle theory, ________ are the main source of economic fluctuations.

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 natural unemployment rate?

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, what is the natural unemployment rate?

The economy's natural unemployment rate is 4 percent. Table 28.4.2 gives some points on the economy's short-run Phillips curve. If the expected inflation rate rises to 8 percent a year,

Figure 28.2.6 Use the figure below to answer the following questions. -Refer to Figure 28.2.6. Starting at point A, the initial effect of a demand-pull inflation is a move to point ________. As a demand-pull inflation spiral proceeds, it follows the path ________.

Deflation occurs when

Figure 28.2.2 Use the figure below to answer the following questions. -Refer to Figure 28.2.2. Complete the following sentence. The figure illustrates

"Intertemporal substitution" in real business cycle theory refers to the change in the ________ as a result of the change in the real interest rate.

Figure 28.2.2 Use the figure below to answer the following questions. -Refer to Figure 28.2.2. The vertical distance between SAS₀ and SAS₁ represents the

Which one of the following can start a demand-pull inflation?

In new classical cycle theory, ________ bring fluctuations in real GDP around potential GDP.

A correctly anticipated increase in the quantity of money, in an economy with an unchanging long-run aggregate supply, will result in

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 shift to AD₁ but remains at AD₀, the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Both new Keynesian and new classical cycle theories claim that

The economy starts out at a full-employment equilibrium. Some events then occur that generate a cost-push inflation. Which of the following events might start a cost-push inflation?

Suppose that in response to a decrease in real interest rates, a person decides to reduce his supply of labour today and increase it in the future. This behaviour is most consistent with the

In real business cycle theory, the supply of labour