Question 1

According to the new classical model, changes in aggregate demand change real GDP

Accepted Answer

A)  all of the time. 
B)  only when the short-run aggregate supply curve is vertical. 
C)  only when the changes in aggregate demand are expected. 
D)  only when the changes in aggregate demand are unexpected. 
A)  all of the time. 
B)  only when the short-run aggregate supply curve is vertical. 
C)  only when the changes in aggregate demand are expected. 
D)  only when the changes in aggregate demand are unexpected.

Question 2

The key ripple effect in real business cycle theory is the ________ decision and it depends on the ________.

Accepted Answer

A)  when-to-invest; real interest rate 
B)  when-to-work; real interest rate 
C)  what-to-save; nominal interest rate 
D)  where-to-work; real wage rate 
A)  when-to-invest; real interest rate 
B)  when-to-work; real interest rate 
C)  what-to-save; nominal interest rate 
D)  where-to-work; real wage rate

Question 3

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point ________ and to point ________.

Accepted Answer

A)  E when aggregate demand increases; D when the money prices of raw materials rise 
B)  C when the money prices of raw materials rise; D when aggregate demand increases 
C)  F when the money prices of raw materials rise; E when aggregate demand increases 
D)  B when aggregate demand decreases; C when the money prices of raw materials rise 
A)  E when aggregate demand increases; D when the money prices of raw materials rise 
B)  C when the money prices of raw materials rise; D when aggregate demand increases 
C)  F when the money prices of raw materials rise; E when aggregate demand increases 
D)  B when aggregate demand decreases; C when the money prices of raw materials rise

Question 4

-Using the above figure as a starting point, a recession in the monetarist model would begin with a

Accepted Answer

A)  rightward shift in the AD curve. 
B)  leftward shift in the AD curve. 
C)  leftward shift in the SAS curve. 
D)  leftward shift in the LAS curve. 
A)  rightward shift in the AD curve. 
B)  leftward shift in the AD curve. 
C)  leftward shift in the SAS curve. 
D)  leftward shift in the LAS curve.

Question 5

A higher price for oil shifts the

Accepted Answer

A)  SAS curve leftward. 
B)  LAS curve leftward. 
C)  SAS curve rightward. 
D)  AD curve rightward. 
A)  SAS curve leftward. 
B)  LAS curve leftward. 
C)  SAS curve rightward. 
D)  AD curve rightward.

Question 6

According to the real business cycle theory, technological change

Accepted Answer

A)  occurs at a constant rate. 
B)  happens only occasionally. 
C)  happens at an uneven pace. 
D)  has been rising in recent years at an increasing rate. 
A)  occurs at a constant rate. 
B)  happens only occasionally. 
C)  happens at an uneven pace. 
D)  has been rising in recent years at an increasing rate.

Question 7

-In the above figure, suppose the economy is at point A initially. For real GDP to increase to and consistently remain above $16 trillion
I.the price level must increase to above 90.
II.there must be continued increases in the quantity of money.

Accepted Answer

A)  only I 
B)  only II 
C)  Both I and II are correct. 
D)  Neither I nor II is correct. 
A)  only I 
B)  only II 
C)  Both I and II are correct. 
D)  Neither I nor II is correct.

Question 8

-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD?, the inflation rate is ________.

Accepted Answer

A)  0 percent a year 
B)  10 percent a year 
C)  20 percent a year 
D)  More than 20 percent a year 
A)  0 percent a year 
B)  10 percent a year 
C)  20 percent a year 
D)  More than 20 percent a year

Question 9

Using the monetarist model, place the following events in the order in which they occur in a business cycle.
I.Money wages fall and the SAS curve shifts rightward.
II.The Federal Reserve decreases the growth rate of the quantity of money.
III.The AD curve shifts leftward.

Accepted Answer

A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  The events are not part of a monetarist model of the business cycle. 
A)  II, III, I 
B)  III, II, I 
C)  I, III, II 
D)  The events are not part of a monetarist model of the business cycle.

Question 10

What is demand-pull inflation?

Accepted Answer

An inflation that st

Question 11

As far as demand-pull inflation goes, the United States

Accepted Answer

A)  has never experienced this type of inflation. 
B)  experienced this type of inflation during the 1990s. 
C)  experienced this type of inflation during the 1960s. 
D)  experienced this type of inflation during the 1950s. 
A)  has never experienced this type of inflation. 
B)  experienced this type of inflation during the 1990s. 
C)  experienced this type of inflation during the 1960s. 
D)  experienced this type of inflation during the 1950s.

Question 12

What was the U.S. experience with demand pull inflation during the 1960s and early 1970s?

Accepted Answer

The United States experienced demand pul

Question 13

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. If inflation expectations remain unchanged, the current unemployment rate is ________.

Accepted Answer

A)  less than the natural rate 
B)  greater than the natural rate 
C)  equal to the natural rate 
D)  6 percent 
A)  less than the natural rate 
B)  greater than the natural rate 
C)  equal to the natural rate 
D)  6 percent

Question 14

An increase in the expected inflation rate leads to a movement upward along the short-run Phillips curve.

Accepted Answer

A) True 
 B)False

Question 15

The anticipated inflation rate is 5 percent. In order for purchasing power to remain constant, the money wage rate must rise by

Accepted Answer

A)  2 percent. 
B)  5 percent. 
C)  7 percent. 
D)  12 percent. 
A)  2 percent. 
B)  5 percent. 
C)  7 percent. 
D)  12 percent.

Question 16

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

Accepted Answer

A)  The real interest rate will fall. 
B)  People will work fewer hours. 
C)  The real wage rate will fall. 
D)  All of the above are true. 
A)  The real interest rate will fall. 
B)  People will work fewer hours. 
C)  The real wage rate will fall. 
D)  All of the above are true.

Question 17

During a deflation, investment ________ and the rate of capital accumulation ________.

Accepted Answer

A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases 
A)  decreases; decreases 
B)  decreases; increases 
C)  increases; decreases 
D)  increases; increases

Question 18

If people CORRECTLY anticipate an increase in aggregate demand, a result is

Accepted Answer

A)  an increase in the real value of outstanding government debt. 
B)  workers demanding higher money wages to keep the real wage unchanged. 
C)  a lower rate of inflation in the current time period. 
D)  there are no predictable results associated with an anticipated increase in aggregate demand. 
A)  an increase in the real value of outstanding government debt. 
B)  workers demanding higher money wages to keep the real wage unchanged. 
C)  a lower rate of inflation in the current time period. 
D)  there are no predictable results associated with an anticipated increase in aggregate demand.

Question 19

Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate.

Accepted Answer

When the expected inflation rate falls,

Question 20

Demand-pull inflation starts with

Accepted Answer

A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  an increase in short-run aggregate supply. 
D)  a decrease in short-run aggregate supply. 
A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  an increase in short-run aggregate supply. 
D)  a decrease in short-run aggregate supply.

According to the new classical model, changes in aggregate demand change real GDP

The key ripple effect in real business cycle theory is the decision and it depends on the .

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point and to point .

-Using the above figure as a starting point, a recession in the monetarist model would begin with a

A higher price for oil shifts the

According to the real business cycle theory, technological change

-In the above figure, suppose the economy is at point A initially. For real GDP to increase to and consistently remain above $16 trillion I.the price level must increase to above 90. II.there must be continued increases in the quantity of money.

-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD?, the inflation rate is ________.

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I.Money wages fall and the SAS curve shifts rightward. II.The Federal Reserve decreases the growth rate of the quantity of money. III.The AD curve shifts leftward.

What is demand-pull inflation?

As far as demand-pull inflation goes, the United States

What was the U.S. experience with demand pull inflation during the 1960s and early 1970s?

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. If inflation expectations remain unchanged, the current unemployment rate is ________.

An increase in the expected inflation rate leads to a movement upward along the short-run Phillips curve.

The anticipated inflation rate is 5 percent. In order for purchasing power to remain constant, the money wage rate must rise by

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

During a deflation, investment and the rate of capital accumulation .

If people CORRECTLY anticipate an increase in aggregate demand, a result is

Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate.

Demand-pull inflation starts with

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

According to the new classical model, changes in aggregate demand change real GDP

The key ripple effect in real business cycle theory is the ________ decision and it depends on the ________.

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point ________ and to point ________.

-Using the above figure as a starting point, a recession in the monetarist model would begin with a

A higher price for oil shifts the

According to the real business cycle theory, technological change

-In the above figure, suppose the economy is at point A initially. For real GDP to increase to and consistently remain above $16 trillion I.the price level must increase to above 90. II.there must be continued increases in the quantity of money.

-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD?, the inflation rate is ________.

Using the monetarist model, place the following events in the order in which they occur in a business cycle. I.Money wages fall and the SAS curve shifts rightward. II.The Federal Reserve decreases the growth rate of the quantity of money. III.The AD curve shifts leftward.

What is demand-pull inflation?

As far as demand-pull inflation goes, the United States

What was the U.S. experience with demand pull inflation during the 1960s and early 1970s?

-The figure above shows an economy's Phillips curves. Currently, the inflation rate is 6 percent a year. If inflation expectations remain unchanged, the current unemployment rate is ________.

An increase in the expected inflation rate leads to a movement upward along the short-run Phillips curve.

The anticipated inflation rate is 5 percent. In order for purchasing power to remain constant, the money wage rate must rise by

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

During a deflation, investment ________ and the rate of capital accumulation ________.

If people CORRECTLY anticipate an increase in aggregate demand, a result is

Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate.

Demand-pull inflation starts with

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

The key ripple effect in real business cycle theory is the decision and it depends on the .

-The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the U.S. economy. The economy is currently at point A. A cost-push rise in the price level will initially move the economy to point and to point .

During a deflation, investment and the rate of capital accumulation .