Deck 12: U.S Inflation, Unemployment, and Business Cycle

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

A) An improvement in technology
B) Zn increase in imports
C) A decrease in productivity
D) None of the above can start a demand-pull inflation.
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Question
Demand-pull inflation could start with

A) an increase in government expenditure followed by an increase in the money wage rate.
B) a decrease in exports followed by a decrease in the quantity of money.
C) a rise in prices of raw materials followed by an increase in the quantity of money.
D) an increase in the quantity of money followed by a decrease in the money wage rate.
Question
Which of the following could lead to demand-pull inflation?

A) an increase in oil prices
B) an increase in the quantity of money
C) an increase in the money wage rate
D) a decrease in exports
Question
Demand-pull inflation starts as the

A) AD curve shifts rightward.
B) LAS curve shifts leftward.
C) AD curve shifts leftward.
D) LAS curve shifts rightward.
Question
<strong>  Which of the above figures best shows the start of a demand-pull inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D <div style=padding-top: 35px>
Which of the above figures best shows the start of a demand-pull inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
Question
Demand-pull inflation starts with a shift of the

A) SAS curve rightward.
B) AD curve rightward.
C) AD curve leftward.
D) SAS curve leftward.
Question
<strong>  Which of the above figures best shows the start of a demand-pull inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D <div style=padding-top: 35px>
Which of the above figures best shows the start of a demand-pull inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
Question
Demand-pull inflation starts with

A) an increase in short-run aggregate supply.
B) a decrease in short-run aggregate supply.
C) a decrease in aggregate demand.
D) an increase in aggregate demand.
Question
Which of the following can start an inflation?

A) a decrease in aggregate supply
B) an increase in aggregate supply
C) an increase in aggregate demand
D) Both answers A and C are correct.
Question
Demand-pull inflation can start when

A) money wage rates rise faster than prices.
B) the short-run aggregate supply curve shifts rightward.
C) the aggregate demand curve shifts rightward.
D) money wage rates rise but the price level does not change.
Question
Which of the following is NOT a potential start of a demand-pull inflation?

A) an increase in government expenditure
B) an increase in the quantity of money
C) an increase in exports
D) an increase in the money wage rate
Question
Inflation can be started by

A) a decrease in aggregate supply or a decrease in aggregate demand.
B) an increase in aggregate supply or an increase in aggregate demand.
C) an increase in aggregate supply or a decrease in aggregate demand.
D) a decrease in aggregate supply or an increase in aggregate demand.
Question
Which of the following is NOT a potential start of a demand-pull inflation?

A) an increase in government expenditure
B) an increase in exports
C) an increase in the quantity of money
D) an increase in taxes
Question
Which of the following is a change that would NOT start a demand-pull inflation?

A) an increase in exports
B) an increase in the quantity of money
C) an increase in labor productivity
D) an increase in government expenditure on goods and services
Question
Which of the following could NOT start a demand-pull inflation?

A) increases in oil prices
B) increases in net exports
C) increases in the quantity of money
D) increases in government expenditure
Question
Demand-pull inflation is an inflation that results from an initial .

A) increase in natural resource prices
B) increase in aggregate demand
C) decrease in aggregate demand
D) increase in wage rates
Question
Which of the following could start a demand-pull inflation?

A) an increase in imports
B) a decrease in the quantity of money
C) an increase in government expenditure
D) an increase in the money prices of raw materials
Question
Increases in the quantity of money can start a inflation and an increase in government expenditure can start a inflation.

A) cost-push; cost-push
B) demand-pull; demand-pull
C) demand-pull; cost-push
D) cost-push; demand-pull
Question
Demand pull inflation can be started by

A) a decrease in net exports.
B) a decrease in the quantity of money.
C) an increase in government expenditure.
D) an increase in the price of oil
Question
Which of the following factors could start a demand-pull inflation ?

A) an increase in exports
B) a decrease in wage rates
C) a decrease in government expenditure
D) an increase in tax rates
Question
A demand-pull inflation requires persistent increases in

A) tax rates.
B) government expenditures.
C) the quantity of money.
D) real wages.
Question
An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with

A) a higher price level and an increased level of real GDP.
B) the same price level and a lower level of real GDP.
C) a higher price level but the same real GDP.
D) None of the above answers are correct.
Question
<strong>  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 .</strong> A) A, that is, the price level and level of real GDP will not change. B) B C) C D) D <div style=padding-top: 35px>
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 .

A) A, that is, the price level and level of real GDP will not change.
B) B
C) C
D) D
Question
Initially, demand-pull inflation will

A) increase both the price level and increase real GDP.
B) increase the price level and decrease real GDP.
C) increase the price level and not change real GDP.
D) shift the aggregate supply curve rightward.
Question
A demand-pull inflation consists of shifts in the AD curve and shifts in the SAS
Curve.

A) rightward; leftward
B) rightward; rightward
C) leftward; leftward
D) leftward; rightward
Question
In a demand-pull inflation brought about by increases in the quantity of money, real GDP might increase at times because

A) real wages fall.
B) money wages fall.
C) real wages rise.
D) tax rates decline.
Question
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?

A) decreased aggregate demand, decreased short-run aggregate supply, decreased long-run aggregate supply
B) decreased aggregate demand, increased short-run aggregate supply, constant long-run aggregate supply
C) increased aggregate demand, decreased short-run aggregate supply, constant long-run aggregate supply
D) increased aggregate demand, increased short-run aggregate supply, increased long-run aggregate supply
Question
Demand-pull inflation results from continually increasing the quantity of money, which leads to a continually

A) decreasing aggregate demand.
B) decreasing long-run aggregate supply.
C) increasing aggregate supply.
D) increasing aggregate demand.
Question
Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing,

A) eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation.
B) the short-run aggregate supply curve will not shift leftward and there will be continued inflation.
C) the economy will experience a temporary reduction in employment but will eventually return to full employment.
D) output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.
Question
If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be

A) an eventual leftward shift in the short-run aggregate supply curve.
B) upward pressure on money wage rates.
C) unemployment below the natural rate.
D) All of the above answers are correct.
Question
A demand-pull inflation initially is characterized by

A) decreasing real output and a labor surplus.
B) decreasing real output and a labor shortage.
C) increasing real output and a labor surplus.
D) increasing real output and a labor shortage.
Question
In a persisting demand-pull inflation

A) short-run aggregate supply decreases and aggregate demand increases.
B) aggregate demand increases and long-run aggregate supply decreases.
C) aggregate demand and short-run aggregate supply both decrease.
D) None of the above answers are correct.
Question
If the economy is at potential GDP and the Fed increases the quantity of money, then

A) potential GDP rises.
B) real GDP rises permanently above potential GDP.
C) real GDP rises temporarily above potential GDP.
D) potential GDP and real GDP both decrease.
Question
<strong>  In the above figure, suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods. In the short run, this change creates a movement to point and an eventual increase in .</strong> A) B; money wage rates B) D; the natural unemployment rate C) D; money wage rates D) B; the natural unemployment rate <div style=padding-top: 35px>
In the above figure, suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods. In the short run, this change creates a movement to point and an eventual increase in .

A) B; money wage rates
B) D; the natural unemployment rate
C) D; money wage rates
D) B; the natural unemployment rate
Question
During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP,

A) the SAS curve will shift leftward continuously and the AD curve will not shift.
B) the AD curve will shift rightward continuously and SAS curves will shift leftward continuously.
C) the AD curve will shift rightward continuously and the SAS curve will not shift.
D) there will be a one-time shift in the AD and the SAS curves.
Question
A one-time rise in the price level can turn into a demand-pull inflation when .

A) the quantity of money persistently increases
B) the quantity of money persistently decreases
C) taxes consistently increase
D) the money wage rate continues to increase
Question
If the Fed responds to an increase in aggregate demand by increasing the quantity of money,

A) money wage rates will fall to reduce the unemployment.
B) output will begin to decrease more rapidly than otherwise.
C) there will be continued inflation.
D) nothing happens because aggregate demand had already increased.
Question
If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

A) LAS curve shifts rightward.
B) SAS curve shifts leftward.
C) LAS curve shifts leftward.
D) SAS curve shifts rightward.
Question
If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

A) money wages will fall to reduce the unemployment.
B) there is the risk of continued inflation.
C) there will be no inflationary gap.
D) real GDP will begin to decrease more rapidly than if the quantity of money had remained constant.
Question
Demand-pull inflation persists because of

A) continuing increases in aggregate supply.
B) continuing increases in the quantity of money.
C) continuing increases in government expenditures.
D) continuing increases in real wage rates.
Question
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will</strong> A) fall because a labor shortage now exists. B) rise because a labor surplus now exists. C) rise because a labor shortage now exists. D) fall because a labor surplus now exists. <div style=padding-top: 35px>
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will

A) fall because a labor shortage now exists.
B) rise because a labor surplus now exists.
C) rise because a labor shortage now exists.
D) fall because a labor surplus now exists.
Question
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. At point D, the real wage rate has</strong> A) fallen. B) risen by the same percentage as the price level. C) risen. D) remained constant. <div style=padding-top: 35px>
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. At point D, the real wage rate has

A) fallen.
B) risen by the same percentage as the price level.
C) risen.
D) remained constant.
Question
Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following?

A) an increase in the nationʹs capital stock
B) a large crop failure that boosts the prices of raw food materials
C) an increase in the labor force
D) a decrease in tax rates
Question
Cost-push inflation can be started by

A) an increase in the money prices of raw materials.
B) a decrease in government expenditure on goods and services.
C) a decrease in the money wage rate.
D) an increase in the quantity of money.
Question
<strong>   -In the above figure, suppose the economy is at point A initially. For real GDP to increase to and Consistently remain above $13 trillion, I. the price level must increase to above 90. II. there must be continued increases in the quantity of money.</strong> A) only I B) Both I and II are correct. C) only II D) Neither I nor II is correct. <div style=padding-top: 35px>

-In the above figure, suppose the economy is at point A initially. For real GDP to increase to and
Consistently remain above $13 trillion,
I. the price level must increase to above 90.
II. there must be continued increases in the quantity of money.

A) only I
B) Both I and II are correct.
C) only II
D) Neither I nor II is correct.
Question
To prevent demand-pull inflation

A) real GDP must increase.
B) the Fed must not let the quantity of money persistently rise.
C) firms must refuse to increase wages.
D) the natural unemployment rate must increase.
Question
<strong>  In the above figure, the movement from point A to B to C to D to E represents</strong> A) demand-pull inflation resulting solely from wage responses to excess labor demand. B) cost-push inflation resulting solely from wage responses to excess labor demand. C) demand-pull inflation resulting from persistent increases in the quantity of money. D) cost-push inflation resulting from persistent increases in the quantity of money. <div style=padding-top: 35px>
In the above figure, the movement from point A to B to C to D to E represents

A) demand-pull inflation resulting solely from wage responses to excess labor demand.
B) cost-push inflation resulting solely from wage responses to excess labor demand.
C) demand-pull inflation resulting from persistent increases in the quantity of money.
D) cost-push inflation resulting from persistent increases in the quantity of money.
Question
<strong>  In the above, which figure shows the start of a cost-push inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D <div style=padding-top: 35px>
In the above, which figure shows the start of a cost-push inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
Question
In a demand-pull inflation, money wage rates rise because

A) an increase in aggregate demand creates a labor shortage.
B) a decrease in aggregate demand creates a labor surplus.
C) a decrease in aggregate demand creates a labor shortage.
D) an increase in aggregate demand creates a labor surplus.
Question
<strong>  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 Demand-pull rise in the price level will initially move the economy to point and to point )</strong> A) E; A when aggregate demand changes B) E when aggregate demand increases; D when the wage rate rises C) C when the wage rate rises; D when aggregate demand increases D) B when aggregate demand decreases; C when the wage rate rises <div style=padding-top: 35px>
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
Demand-pull rise in the price level will initially move the economy to point and to point
)

A) E; A when aggregate demand changes
B) E when aggregate demand increases; D when the wage rate rises
C) C when the wage rate rises; D when aggregate demand increases
D) B when aggregate demand decreases; C when the wage rate rises
Question
As the money wage rate rises,

A) the short-run aggregate supply curve shifts rightward.
B) the long-run aggregate supply curve shifts rightward.
C) both the long-run aggregate supply curve and the short-run aggregate supply curve shift leftward.
D) the short-run aggregate supply curve shifts leftward.
Question
To stop a demand-pull inflation using monetary policy, you would recommend that the Fed

A) increase the quantity of money.
B) not increase the quantity of money.
C) purchase government bonds in the open market.
D) increase tax rates.
Question
The main sources of cost-push inflation are increases in

A) aggregate demand and real wage rates.
B) real wage rates and the cost of raw materials.
C) money wage rates and aggregate demand.
D) money wage rates and the cost of raw materials.
Question
In a demand-pull inflation, if the Fed stops expanding the quantity of money,

A) the demand-pull inflation ends.
B) a cost-push inflation will occur.
C) a deflation will occur.
D) government expenditure will cause the demand-pull inflation to continue.
Question
<strong>   -In the above figure, if the economy moves from point A to point E,</strong> A) money wage rates have increased. B) there may have been demand-pull inflation. C) there has been economic growth. D) Both answers A and B are correct. <div style=padding-top: 35px>

-In the above figure, if the economy moves from point A to point E,

A) money wage rates have increased.
B) there may have been demand-pull inflation.
C) there has been economic growth.
D) Both answers A and B are correct.
Question
When the AD and SAS curves intersect at a level of real GDP which exceeds potential GDP and there is no government policy undertaken, which of the following will occur?

A) The AD curve shifts leftward because the money wage rate rises.
B) The AD curve shifts rightward because the Fed decreases the money supply.
C) The SAS curve shifts leftward because the money wage rate rises.
D) The AS curve shifts leftward because the money wage rate falls.
Question
A demand-pull inflation occurred in the United States during most of the later part of the

A) 1980s.
B) 2000s.
C) 1960s.
D) 1990s.
Question
As far as demand-pull inflation goes, the United States

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 1950s.
D) experienced this type of inflation during the 1960s.
Question
<strong>  In the above figure, which path represents a demand-pull inflation?</strong> A) point A to B to D to F to G B) point A to C to D to F to G C) point A to C to D to E to G D) point A to B to D to E to G <div style=padding-top: 35px>
In the above figure, which path represents a demand-pull inflation?

A) point A to B to D to F to G
B) point A to C to D to F to G
C) point A to C to D to E to G
D) point A to B to D to E to G
Question
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. If the quantity of money remains constant, the economy will adjust with</strong> A) aggregate demand shifting back to AD<sub>0</sub>. B) aggregate demand shifting to AD<sub>2</sub>. C) short-run aggregate supply shifting leftward to SAS<sub>2</sub>. D) short-run aggregate supply shifting leftward to SAS<sub>1</sub>. <div style=padding-top: 35px>
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. If the quantity of money remains constant, the economy will adjust with

A) aggregate demand shifting back to AD0.
B) aggregate demand shifting to AD2.
C) short-run aggregate supply shifting leftward to SAS2.
D) short-run aggregate supply shifting leftward to SAS1.
Question
Cost-push inflation starts with a

A) falling GDP and falling unemployment rate.
B) falling GDP and rising unemployment rate.
C) raising GDP and falling unemployment rate.
D) raising GDP and rising unemployment rate.
Question
Cost-push inflation can start with

A) a decrease in investment.
B) an increase in oil prices.
C) a decrease in the quantity of money.
D) an increase in government expenditure.
Question
Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases. If the Federal Reserve does not respond, the higher money price of raw materials will
I. repeatedly shift the aggregate demand curve rightward and raise the price level.
II. shift the aggregate demand curve rightward and the aggregate supply curve leftward, raising prices.
III. result initially in lower employment and a higher price level.

A) both II and III
B) both I and II
C) III only
D) I only
Question
Cost-push inflation can start with

A) higher money wage rates.
B) an increase in government expenditure.
C) an increase in transfer payments.
D) lower taxes.
Question
By itself, a fall in the price of oil shifts the

A) short-run aggregate supply curve rightward and does not shift the aggregate demand curve.
B) short-run aggregate supply curve leftward and does not shift the aggregate demand curve.
C) aggregate demand curve rightward and does not shift the short-run aggregate supply curve.
D) aggregate demand curve leftward and does not shift the short-run aggregate supply curve.
Question
If the prices of crucial raw materials increase,

A) the short-run aggregate supply curve shifts leftward.
B) a cost-push inflation could occur depending on the behavior of the Federal Reserve.
C) stagflation could occur.
D) All of the above answers are correct.
Question
An increase in the price of a resource such as oil
I. shifts the aggregate demand curve leftward.
II. shifts the long-run aggregate supply curve rightward.
III. shifts the short-run aggregate supply curve leftward.
IV. increases the price level and decreases real GDP in the short run.

A) Only I is correct.
B) Only III is correct.
C) Both III and IV are correct.
D) Both I and II are correct.
Question
If oil prices increase, then in the short run, real GDP will and the price level will
)

A) decrease; rise
B) increase; rise
C) decrease; fall
D) increase; fall
Question
A higher price for oil shifts the

A) SAS curve leftward.
B) LAS curve leftward.
C) AD curve rightward.
D) SAS curve rightward.
Question
Cost-push inflation starts with

A) an increase in aggregate demand.
B) a decrease in short-run aggregate supply.
C) a decrease in aggregate demand.
D) an increase in short-run aggregate supply.
Question
Cost-push inflation might initially result from

A) an increase in government expenditure.
B) an increase in the cost of resources.
C) the use of new technology.
D) an increase in the quantity of money.
Question
When a cost-push inflation starts

A) real GDP rises faster than the quantity of money.
B) the short-run aggregate supply curve shifts rightward.
C) the price level falls and the money wages rises.
D) the price level rises and real GDP decreases.
Question
The SAS curve shifts leftward if

A) the money wage rate increases.
B) OPEC reduces world oil prices.
C) tax cuts stimulate labor supply.
D) good weather increases agricultural harvests.
Question
A leftward shift in the aggregate supply curve

A) is the result of consumer expenditures exceeding available output.
B) increases both the price level and real GDP.
C) is the result of the Fed increasing the quantity of money.
D) is the result of a rise the price of a key resource.
Question
Cost-push inflation is an inflation that results from an initial .

A) increase in investment
B) increase in taxes
C) increase in money wage rates or money prices of raw materials
D) decrease in taxes
Question
The initial factors that can create a cost-push inflation do NOT include

A) increases in money wage rates.
B) increases in the quantity of money.
C) increases in the money prices of raw materials.
D) None of the above answers is correct because all of the above could be the initial cause of a cost-push inflation.
Question
An increase in the money wage rate shifts the SAS curve and an increase in the money prices of raw materials shifts the SAS curve .

A) rightward; leftward
B) leftward; rightward
C) rightward; rightward
D) leftward; leftward
Question
At the start of a cost-push inflation,

A) real GDP increases faster than the quantity of money.
B) prices and unemployment are rising.
C) productivity rises.
D) the short-run aggregate supply curve shifts rightward.
Question
At the start of a cost-push inflation,

A) the price level rises and real GDP decreases.
B) the price level and real GDP both increase.
C) only real GDP changes while the price level remains constant.
D) the price level rises and real GDP does not change.
Question
By itself, an increase in the price of oil shifts the

A) short-run aggregate supply curve leftward and does not shift the aggregate demand curve.
B) aggregate demand curve leftward and does not shift the short-run aggregate supply curve.
C) aggregate demand curve rightward and does not shift the short-run aggregate supply curve.
D) short-run aggregate supply curve rightward and does not shift the aggregate demand curve.
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Deck 12: U.S Inflation, Unemployment, and Business Cycle
1
Which of the following can start a demand-pull inflation?

A) An improvement in technology
B) Zn increase in imports
C) A decrease in productivity
D) None of the above can start a demand-pull inflation.
D
2
Demand-pull inflation could start with

A) an increase in government expenditure followed by an increase in the money wage rate.
B) a decrease in exports followed by a decrease in the quantity of money.
C) a rise in prices of raw materials followed by an increase in the quantity of money.
D) an increase in the quantity of money followed by a decrease in the money wage rate.
A
3
Which of the following could lead to demand-pull inflation?

A) an increase in oil prices
B) an increase in the quantity of money
C) an increase in the money wage rate
D) a decrease in exports
B
4
Demand-pull inflation starts as the

A) AD curve shifts rightward.
B) LAS curve shifts leftward.
C) AD curve shifts leftward.
D) LAS curve shifts rightward.
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5
<strong>  Which of the above figures best shows the start of a demand-pull inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D
Which of the above figures best shows the start of a demand-pull inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
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6
Demand-pull inflation starts with a shift of the

A) SAS curve rightward.
B) AD curve rightward.
C) AD curve leftward.
D) SAS curve leftward.
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7
<strong>  Which of the above figures best shows the start of a demand-pull inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D
Which of the above figures best shows the start of a demand-pull inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
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8
Demand-pull inflation starts with

A) an increase in short-run aggregate supply.
B) a decrease in short-run aggregate supply.
C) a decrease in aggregate demand.
D) an increase in aggregate demand.
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9
Which of the following can start an inflation?

A) a decrease in aggregate supply
B) an increase in aggregate supply
C) an increase in aggregate demand
D) Both answers A and C are correct.
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10
Demand-pull inflation can start when

A) money wage rates rise faster than prices.
B) the short-run aggregate supply curve shifts rightward.
C) the aggregate demand curve shifts rightward.
D) money wage rates rise but the price level does not change.
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11
Which of the following is NOT a potential start of a demand-pull inflation?

A) an increase in government expenditure
B) an increase in the quantity of money
C) an increase in exports
D) an increase in the money wage rate
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12
Inflation can be started by

A) a decrease in aggregate supply or a decrease in aggregate demand.
B) an increase in aggregate supply or an increase in aggregate demand.
C) an increase in aggregate supply or a decrease in aggregate demand.
D) a decrease in aggregate supply or an increase in aggregate demand.
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13
Which of the following is NOT a potential start of a demand-pull inflation?

A) an increase in government expenditure
B) an increase in exports
C) an increase in the quantity of money
D) an increase in taxes
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14
Which of the following is a change that would NOT start a demand-pull inflation?

A) an increase in exports
B) an increase in the quantity of money
C) an increase in labor productivity
D) an increase in government expenditure on goods and services
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15
Which of the following could NOT start a demand-pull inflation?

A) increases in oil prices
B) increases in net exports
C) increases in the quantity of money
D) increases in government expenditure
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16
Demand-pull inflation is an inflation that results from an initial .

A) increase in natural resource prices
B) increase in aggregate demand
C) decrease in aggregate demand
D) increase in wage rates
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17
Which of the following could start a demand-pull inflation?

A) an increase in imports
B) a decrease in the quantity of money
C) an increase in government expenditure
D) an increase in the money prices of raw materials
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18
Increases in the quantity of money can start a inflation and an increase in government expenditure can start a inflation.

A) cost-push; cost-push
B) demand-pull; demand-pull
C) demand-pull; cost-push
D) cost-push; demand-pull
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19
Demand pull inflation can be started by

A) a decrease in net exports.
B) a decrease in the quantity of money.
C) an increase in government expenditure.
D) an increase in the price of oil
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20
Which of the following factors could start a demand-pull inflation ?

A) an increase in exports
B) a decrease in wage rates
C) a decrease in government expenditure
D) an increase in tax rates
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21
A demand-pull inflation requires persistent increases in

A) tax rates.
B) government expenditures.
C) the quantity of money.
D) real wages.
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22
An initial increase in aggregate demand that is NOT followed by an increase in the quantity of money results in a long-run equilibrium with

A) a higher price level and an increased level of real GDP.
B) the same price level and a lower level of real GDP.
C) a higher price level but the same real GDP.
D) None of the above answers are correct.
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23
<strong>  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 .</strong> A) A, that is, the price level and level of real GDP will not change. B) B C) C D) D
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 .

A) A, that is, the price level and level of real GDP will not change.
B) B
C) C
D) D
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24
Initially, demand-pull inflation will

A) increase both the price level and increase real GDP.
B) increase the price level and decrease real GDP.
C) increase the price level and not change real GDP.
D) shift the aggregate supply curve rightward.
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25
A demand-pull inflation consists of shifts in the AD curve and shifts in the SAS
Curve.

A) rightward; leftward
B) rightward; rightward
C) leftward; leftward
D) leftward; rightward
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26
In a demand-pull inflation brought about by increases in the quantity of money, real GDP might increase at times because

A) real wages fall.
B) money wages fall.
C) real wages rise.
D) tax rates decline.
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27
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?

A) decreased aggregate demand, decreased short-run aggregate supply, decreased long-run aggregate supply
B) decreased aggregate demand, increased short-run aggregate supply, constant long-run aggregate supply
C) increased aggregate demand, decreased short-run aggregate supply, constant long-run aggregate supply
D) increased aggregate demand, increased short-run aggregate supply, increased long-run aggregate supply
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28
Demand-pull inflation results from continually increasing the quantity of money, which leads to a continually

A) decreasing aggregate demand.
B) decreasing long-run aggregate supply.
C) increasing aggregate supply.
D) increasing aggregate demand.
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29
Suppose that a shock causes the aggregate demand curve to shift rightward. If the Fed does nothing,

A) eventually the short-run aggregate supply curve will shift leftward and there will be continued inflation.
B) the short-run aggregate supply curve will not shift leftward and there will be continued inflation.
C) the economy will experience a temporary reduction in employment but will eventually return to full employment.
D) output initially will exceed potential GDP, but the economy will return to potential GDP with a higher price level.
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30
If an economy at potential GDP experiences a demand shock that shifts the aggregate demand curve rightward, there will be

A) an eventual leftward shift in the short-run aggregate supply curve.
B) upward pressure on money wage rates.
C) unemployment below the natural rate.
D) All of the above answers are correct.
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31
A demand-pull inflation initially is characterized by

A) decreasing real output and a labor surplus.
B) decreasing real output and a labor shortage.
C) increasing real output and a labor surplus.
D) increasing real output and a labor shortage.
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32
In a persisting demand-pull inflation

A) short-run aggregate supply decreases and aggregate demand increases.
B) aggregate demand increases and long-run aggregate supply decreases.
C) aggregate demand and short-run aggregate supply both decrease.
D) None of the above answers are correct.
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33
If the economy is at potential GDP and the Fed increases the quantity of money, then

A) potential GDP rises.
B) real GDP rises permanently above potential GDP.
C) real GDP rises temporarily above potential GDP.
D) potential GDP and real GDP both decrease.
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34
<strong>  In the above figure, suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods. In the short run, this change creates a movement to point and an eventual increase in .</strong> A) B; money wage rates B) D; the natural unemployment rate C) D; money wage rates D) B; the natural unemployment rate
In the above figure, suppose that the economy is at point A when foreign countries begin an expansion and buy more U.S.-made goods. In the short run, this change creates a movement to point and an eventual increase in .

A) B; money wage rates
B) D; the natural unemployment rate
C) D; money wage rates
D) B; the natural unemployment rate
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35
During a demand-pull inflation, if the Fed tries to maintain a level of real GDP above potential GDP,

A) the SAS curve will shift leftward continuously and the AD curve will not shift.
B) the AD curve will shift rightward continuously and SAS curves will shift leftward continuously.
C) the AD curve will shift rightward continuously and the SAS curve will not shift.
D) there will be a one-time shift in the AD and the SAS curves.
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36
A one-time rise in the price level can turn into a demand-pull inflation when .

A) the quantity of money persistently increases
B) the quantity of money persistently decreases
C) taxes consistently increase
D) the money wage rate continues to increase
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37
If the Fed responds to an increase in aggregate demand by increasing the quantity of money,

A) money wage rates will fall to reduce the unemployment.
B) output will begin to decrease more rapidly than otherwise.
C) there will be continued inflation.
D) nothing happens because aggregate demand had already increased.
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38
If demand pull inflation occurs when the economy is already at potential GDP, then following the initial increase in aggregate demand, the

A) LAS curve shifts rightward.
B) SAS curve shifts leftward.
C) LAS curve shifts leftward.
D) SAS curve shifts rightward.
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39
If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

A) money wages will fall to reduce the unemployment.
B) there is the risk of continued inflation.
C) there will be no inflationary gap.
D) real GDP will begin to decrease more rapidly than if the quantity of money had remained constant.
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40
Demand-pull inflation persists because of

A) continuing increases in aggregate supply.
B) continuing increases in the quantity of money.
C) continuing increases in government expenditures.
D) continuing increases in real wage rates.
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41
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will</strong> A) fall because a labor shortage now exists. B) rise because a labor surplus now exists. C) rise because a labor shortage now exists. D) fall because a labor surplus now exists.
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. The money wage rate will

A) fall because a labor shortage now exists.
B) rise because a labor surplus now exists.
C) rise because a labor shortage now exists.
D) fall because a labor surplus now exists.
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42
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. At point D, the real wage rate has</strong> A) fallen. B) risen by the same percentage as the price level. C) risen. D) remained constant.
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. At point D, the real wage rate has

A) fallen.
B) risen by the same percentage as the price level.
C) risen.
D) remained constant.
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43
Assuming that GDP currently equals potential GDP, a cost-push inflation could result from which of the following?

A) an increase in the nationʹs capital stock
B) a large crop failure that boosts the prices of raw food materials
C) an increase in the labor force
D) a decrease in tax rates
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44
Cost-push inflation can be started by

A) an increase in the money prices of raw materials.
B) a decrease in government expenditure on goods and services.
C) a decrease in the money wage rate.
D) an increase in the quantity of money.
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45
<strong>   -In the above figure, suppose the economy is at point A initially. For real GDP to increase to and Consistently remain above $13 trillion, I. the price level must increase to above 90. II. there must be continued increases in the quantity of money.</strong> A) only I B) Both I and II are correct. C) only II D) Neither I nor II is correct.

-In the above figure, suppose the economy is at point A initially. For real GDP to increase to and
Consistently remain above $13 trillion,
I. the price level must increase to above 90.
II. there must be continued increases in the quantity of money.

A) only I
B) Both I and II are correct.
C) only II
D) Neither I nor II is correct.
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46
To prevent demand-pull inflation

A) real GDP must increase.
B) the Fed must not let the quantity of money persistently rise.
C) firms must refuse to increase wages.
D) the natural unemployment rate must increase.
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47
<strong>  In the above figure, the movement from point A to B to C to D to E represents</strong> A) demand-pull inflation resulting solely from wage responses to excess labor demand. B) cost-push inflation resulting solely from wage responses to excess labor demand. C) demand-pull inflation resulting from persistent increases in the quantity of money. D) cost-push inflation resulting from persistent increases in the quantity of money.
In the above figure, the movement from point A to B to C to D to E represents

A) demand-pull inflation resulting solely from wage responses to excess labor demand.
B) cost-push inflation resulting solely from wage responses to excess labor demand.
C) demand-pull inflation resulting from persistent increases in the quantity of money.
D) cost-push inflation resulting from persistent increases in the quantity of money.
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48
<strong>  In the above, which figure shows the start of a cost-push inflation?</strong> A) Figure A B) Figure B C) Figure C D) Figure D
In the above, which figure shows the start of a cost-push inflation?

A) Figure A
B) Figure B
C) Figure C
D) Figure D
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49
In a demand-pull inflation, money wage rates rise because

A) an increase in aggregate demand creates a labor shortage.
B) a decrease in aggregate demand creates a labor surplus.
C) a decrease in aggregate demand creates a labor shortage.
D) an increase in aggregate demand creates a labor surplus.
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50
<strong>  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 Demand-pull rise in the price level will initially move the economy to point and to point )</strong> A) E; A when aggregate demand changes B) E when aggregate demand increases; D when the wage rate rises C) C when the wage rate rises; D when aggregate demand increases D) B when aggregate demand decreases; C when the wage rate rises
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
Demand-pull rise in the price level will initially move the economy to point and to point
)

A) E; A when aggregate demand changes
B) E when aggregate demand increases; D when the wage rate rises
C) C when the wage rate rises; D when aggregate demand increases
D) B when aggregate demand decreases; C when the wage rate rises
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51
As the money wage rate rises,

A) the short-run aggregate supply curve shifts rightward.
B) the long-run aggregate supply curve shifts rightward.
C) both the long-run aggregate supply curve and the short-run aggregate supply curve shift leftward.
D) the short-run aggregate supply curve shifts leftward.
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52
To stop a demand-pull inflation using monetary policy, you would recommend that the Fed

A) increase the quantity of money.
B) not increase the quantity of money.
C) purchase government bonds in the open market.
D) increase tax rates.
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53
The main sources of cost-push inflation are increases in

A) aggregate demand and real wage rates.
B) real wage rates and the cost of raw materials.
C) money wage rates and aggregate demand.
D) money wage rates and the cost of raw materials.
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54
In a demand-pull inflation, if the Fed stops expanding the quantity of money,

A) the demand-pull inflation ends.
B) a cost-push inflation will occur.
C) a deflation will occur.
D) government expenditure will cause the demand-pull inflation to continue.
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55
<strong>   -In the above figure, if the economy moves from point A to point E,</strong> A) money wage rates have increased. B) there may have been demand-pull inflation. C) there has been economic growth. D) Both answers A and B are correct.

-In the above figure, if the economy moves from point A to point E,

A) money wage rates have increased.
B) there may have been demand-pull inflation.
C) there has been economic growth.
D) Both answers A and B are correct.
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56
When the AD and SAS curves intersect at a level of real GDP which exceeds potential GDP and there is no government policy undertaken, which of the following will occur?

A) The AD curve shifts leftward because the money wage rate rises.
B) The AD curve shifts rightward because the Fed decreases the money supply.
C) The SAS curve shifts leftward because the money wage rate rises.
D) The AS curve shifts leftward because the money wage rate falls.
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57
A demand-pull inflation occurred in the United States during most of the later part of the

A) 1980s.
B) 2000s.
C) 1960s.
D) 1990s.
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58
As far as demand-pull inflation goes, the United States

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 1950s.
D) experienced this type of inflation during the 1960s.
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59
<strong>  In the above figure, which path represents a demand-pull inflation?</strong> A) point A to B to D to F to G B) point A to C to D to F to G C) point A to C to D to E to G D) point A to B to D to E to G
In the above figure, which path represents a demand-pull inflation?

A) point A to B to D to F to G
B) point A to C to D to F to G
C) point A to C to D to E to G
D) point A to B to D to E to G
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60
<strong>  In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. If the quantity of money remains constant, the economy will adjust with</strong> A) aggregate demand shifting back to AD<sub>0</sub>. B) aggregate demand shifting to AD<sub>2</sub>. C) short-run aggregate supply shifting leftward to SAS<sub>2</sub>. D) short-run aggregate supply shifting leftward to SAS<sub>1</sub>.
In the above figure, the economy initially is at point A and then an increase in the quantity of money moves the economy to point D. If the quantity of money remains constant, the economy will adjust with

A) aggregate demand shifting back to AD0.
B) aggregate demand shifting to AD2.
C) short-run aggregate supply shifting leftward to SAS2.
D) short-run aggregate supply shifting leftward to SAS1.
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61
Cost-push inflation starts with a

A) falling GDP and falling unemployment rate.
B) falling GDP and rising unemployment rate.
C) raising GDP and falling unemployment rate.
D) raising GDP and rising unemployment rate.
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62
Cost-push inflation can start with

A) a decrease in investment.
B) an increase in oil prices.
C) a decrease in the quantity of money.
D) an increase in government expenditure.
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63
Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases. If the Federal Reserve does not respond, the higher money price of raw materials will
I. repeatedly shift the aggregate demand curve rightward and raise the price level.
II. shift the aggregate demand curve rightward and the aggregate supply curve leftward, raising prices.
III. result initially in lower employment and a higher price level.

A) both II and III
B) both I and II
C) III only
D) I only
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64
Cost-push inflation can start with

A) higher money wage rates.
B) an increase in government expenditure.
C) an increase in transfer payments.
D) lower taxes.
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65
By itself, a fall in the price of oil shifts the

A) short-run aggregate supply curve rightward and does not shift the aggregate demand curve.
B) short-run aggregate supply curve leftward and does not shift the aggregate demand curve.
C) aggregate demand curve rightward and does not shift the short-run aggregate supply curve.
D) aggregate demand curve leftward and does not shift the short-run aggregate supply curve.
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66
If the prices of crucial raw materials increase,

A) the short-run aggregate supply curve shifts leftward.
B) a cost-push inflation could occur depending on the behavior of the Federal Reserve.
C) stagflation could occur.
D) All of the above answers are correct.
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67
An increase in the price of a resource such as oil
I. shifts the aggregate demand curve leftward.
II. shifts the long-run aggregate supply curve rightward.
III. shifts the short-run aggregate supply curve leftward.
IV. increases the price level and decreases real GDP in the short run.

A) Only I is correct.
B) Only III is correct.
C) Both III and IV are correct.
D) Both I and II are correct.
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68
If oil prices increase, then in the short run, real GDP will and the price level will
)

A) decrease; rise
B) increase; rise
C) decrease; fall
D) increase; fall
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69
A higher price for oil shifts the

A) SAS curve leftward.
B) LAS curve leftward.
C) AD curve rightward.
D) SAS curve rightward.
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70
Cost-push inflation starts with

A) an increase in aggregate demand.
B) a decrease in short-run aggregate supply.
C) a decrease in aggregate demand.
D) an increase in short-run aggregate supply.
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71
Cost-push inflation might initially result from

A) an increase in government expenditure.
B) an increase in the cost of resources.
C) the use of new technology.
D) an increase in the quantity of money.
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72
When a cost-push inflation starts

A) real GDP rises faster than the quantity of money.
B) the short-run aggregate supply curve shifts rightward.
C) the price level falls and the money wages rises.
D) the price level rises and real GDP decreases.
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73
The SAS curve shifts leftward if

A) the money wage rate increases.
B) OPEC reduces world oil prices.
C) tax cuts stimulate labor supply.
D) good weather increases agricultural harvests.
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74
A leftward shift in the aggregate supply curve

A) is the result of consumer expenditures exceeding available output.
B) increases both the price level and real GDP.
C) is the result of the Fed increasing the quantity of money.
D) is the result of a rise the price of a key resource.
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75
Cost-push inflation is an inflation that results from an initial .

A) increase in investment
B) increase in taxes
C) increase in money wage rates or money prices of raw materials
D) decrease in taxes
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76
The initial factors that can create a cost-push inflation do NOT include

A) increases in money wage rates.
B) increases in the quantity of money.
C) increases in the money prices of raw materials.
D) None of the above answers is correct because all of the above could be the initial cause of a cost-push inflation.
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77
An increase in the money wage rate shifts the SAS curve and an increase in the money prices of raw materials shifts the SAS curve .

A) rightward; leftward
B) leftward; rightward
C) rightward; rightward
D) leftward; leftward
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78
At the start of a cost-push inflation,

A) real GDP increases faster than the quantity of money.
B) prices and unemployment are rising.
C) productivity rises.
D) the short-run aggregate supply curve shifts rightward.
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79
At the start of a cost-push inflation,

A) the price level rises and real GDP decreases.
B) the price level and real GDP both increase.
C) only real GDP changes while the price level remains constant.
D) the price level rises and real GDP does not change.
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80
By itself, an increase in the price of oil shifts the

A) short-run aggregate supply curve leftward and does not shift the aggregate demand curve.
B) aggregate demand curve leftward and does not shift the short-run aggregate supply curve.
C) aggregate demand curve rightward and does not shift the short-run aggregate supply curve.
D) short-run aggregate supply curve rightward and does not shift the aggregate demand curve.
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