Exam 12: The Business Cycle, Inflation, and Deflation

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

Which of the following describes the Keynesian approach to the business cycle? I.Unanticipated shocks to aggregate supply drive expansions and recessions. II.The Keynesian theory is a real business cycle model of the economy. III.A decrease in business confidence can trigger a recession.

For an economy at full employment, an increase in the quantity of money will lead to which of the following sequences of shifts in aggregate demand and supply curves?

"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 As the same pressures affect other industries across China, we expect to see

According to real business cycle theory proponents, an increase in productivity ________ the demand for loanable funds, ________ the demand for labor, and ________ the supply of labor. The real interest rate will ________.

Which of the following could lead to demand-pull inflation?

A demand-pull inflation occurred in the United States during most of the later part of the

Which of the following is NOT a potential start of a demand-pull inflation?

Demand-pull inflation can start when

-In the above figure, which of the following curves represents the long-run Phillips curve?

-In the above figure, suppose that the economy is at point A when the quantity of money increases. In the short run, the economy will move to point ________.

The Keynesian explanation of the business cycle rests on several concepts, including

The short-run Phillips curve shows the ________ relationship between ________.

Cost-push inflation starts with

Suppose that last year the economy of Suffera was experiencing an expected inflation rate of 8 percent and unemployment rate of 12 percent. An unexpected increase in the inflation rate would

Demand-pull inflation could start with

The key difference between the new classical theory of the business cycle and the new Keynesian theory of the business cycle is that the new classical theory believes that ________ while the new Keynesian theory believes that ________.

In the Keynesian business cycle theory, business cycles begin with changes in

To prevent demand-pull inflation

-The figure above shows the initial aggregate demand curve, AD?, the initial short-run aggregate supply curve, SAS?, 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. Then, Atlantia's oil producers form a price-fixing organization and increase the price of oil. Suppose that potential GDP does not change and that Atlantia's Central Bank takes no action. Draw the new aggregate demand and short-run aggregate supply curves in the figure to show the effects of this event on Atlantia's real GDP and price level. a)What happens to aggregate supply and aggregate demand? b)What are the new equilibrium real GDP and price level? c)Will the rise in the price of oil lead to inflation in Atlantia? Why or why not?