Exam 12: The Business Cycle, Inflation, and Deflation

One example of cost-push inflation is an increase in

The Cleveland Federal Reserve Bank's estimate of expected inflation has fallen from 3.5 percent in 2000 to 1.5 percent in 2013. This fall means that

If the prices of crucial raw materials increase

"Shoe Industry under Pressure Amid Rising Costs" Rising costs have forced about 15 per cent of shoe manufacturers in a major south China industrial centre to shut down or relocate in the past year... [the firms have] identified rising wages as a key factor behind the closures and relocations from Dongguan...The problems in the footwear industry reflect broader issues affecting manufacturers across China's Pearl River Delta..." Www)ft.com, 2/26/2008 Using an AS/AD framework to describe the events in the story, there would be a

During a deflation, the nominal interest rate is ________ and the velocity of circulation ________.

-Which of the above figures best shows the start of a demand-pull inflation?

To prevent cost-push inflation

Distinguish between the short-run and long-run Phillips curves.

Demand pull inflation can be started by

To stop a demand-pull inflation using monetary policy, you would recommend that the Fed

If the real interest rate is 4 percent and workers expect real wages to be 2 percent year higher next year, according to real business cycle theory, workers will work

What is the factor that leads to business cycles in the monetarist cycle theory?

Increases in government expenditure can create cost-push inflation.

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

If the real interest rate is 2 percent and workers expect real wages to be 4 percent higher next year, according to real business cycle theory, workers will work

-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

Suppose that the Federal Reserve is expected to expand the quantity of money by 5 percent but ends up expanding it by only 2 percent. If the new Keynesian theory is CORRECT, which of the following describes the effect on the economy?

-In the above figure, suppose that the economy has moved from point A to point C. According to the monetarist theory of the business cycle, what could have caused this movement?

Which theory maintains that the money wage rate always adjusts freely?

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