Deck 12: Inflation, Jobs, and the Business Cycle

Question 1

Increases in the quantity of money can start a ________ inflation and an increase in government expenditure can start a ________ inflation.

A) demand-pull; demand-pull
B) demand-pull; cost-push
C) cost-push; cost-push
D) cost-push; demand-pull

Answer 1

A

Question 2

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

A) an increase in the money wage rate
B) an increase in the quantity of money
C) a decrease in exports
D) an increase in oil prices

Answer 2

B

Question 3

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

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

Answer 3

D

Question 4

Demand-pull inflation starts with a shift of the

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

Question 5

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

A) an increase in the quantity of money
B) an increase in government expenditure
C) an increase in taxes
D) an increase in exports

Question 6

Which of the following could start a demand-pull inflation?

A) an increase in government expenditure
B) an increase in imports
C) a decrease in the quantity of money
D) an increase in the money prices of raw materials

Question 7

Demand pull inflation can be started by

A) a decrease in the quantity of money.
B) an increase in government expenditure.
C) a decrease in net exports.
D) an increase in the price of oil

Question 8

Demand-pull inflation starts as the

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

Question 9

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 10

Inflation can be started by

A) a decrease in aggregate supply or a decrease in aggregate demand.
B) a decrease in aggregate supply or an increase in aggregate demand.
C) an increase in aggregate supply or an increase in aggregate demand.
D) an increase in aggregate supply or a decrease in aggregate demand.

Question 11

Which of the following factors could start a demand-pull inflation ?

A) an increase in tax rates
B) a decrease in government expenditure
C) a decrease in wage rates
D) an increase in exports

Question 12

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

A) an increase in the money wage rate
B) an increase in the quantity of money
C) an increase in government expenditure
D) an increase in exports

Question 13

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

A) increases in government expenditure
B) increases in net exports
C) increases in oil prices
D) increases in the quantity of money

Question 14

Demand-pull inflation is an inflation that results from an initial ________.

A) increase in aggregate demand
B) decrease in aggregate demand
C) increase in wage rates
D) increase in natural resource prices

Question 15

Demand-pull inflation can start when

A) money wage rates rise but the price level does not change.
B) money wage rates rise faster than prices.
C) the short-run aggregate supply curve shifts rightward.
D) the aggregate demand curve shifts rightward.

Question 16

Demand-pull inflation starts with

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.

Question 17

Which of the following is a change that would NOT start a demand-pull inflation?

A) an increase in exports
B) an increase in labor productivity
C) an increase in government expenditure on goods and services
D) an increase in the quantity of money

Question 18

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 19

Which of the following can start an inflation?

A) an increase in aggregate demand
B) an increase in aggregate supply
C) a decrease in aggregate supply
D) Both answers A and C are correct.

Question 20

Demand-pull inflation could start with

A) an increase in government expenditure followed by an increase in the money wage rate.
B) an increase in the quantity of money followed by a decrease in the money wage rate.
C) a rise in prices of raw materials followed by an increase in the quantity of money.
D) a decrease in exports followed by a decrease in the quantity of money.

Question 21

Demand-pull inflation persists because of

A) continuing increases in government expenditures.
B) continuing increases in the quantity of money.
C) continuing increases in real wage rates.
D) continuing increases in aggregate supply.

Question 22

If the Fed responds to an increase in aggregate demand by increasing the quantity of money,

A) nothing happens because aggregate demand had already increased.
B) output will begin to decrease more rapidly than otherwise.
C) money wage rates will fall to reduce the unemployment.
D) there will be continued inflation.

Question 23

In a persisting demand-pull inflation

A) short-run aggregate supply decreases and aggregate demand increases.
B) aggregate demand and short-run aggregate supply both decrease.
C) aggregate demand increases and long-run aggregate supply decreases.
D) None of the above answers are correct.

Question 24

During a demand-pull inflation,if the Fed tries to maintain a level of real GDP above potential GDP,

A) there will be a one-time shift in the AD and the SAS curves.
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) the SAS curve will shift leftward continuously and the AD curve will not shift.

Question 25

Initially,demand-pull inflation will

A) increase the price level and not change real GDP.
B) increase both the price level and increase real GDP.
C) increase the price level and decrease real GDP.
D) shift the aggregate supply curve rightward.

Question 26

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 27

Demand-pull inflation results from continually increasing the quantity of money,which leads to a continually

A) decreasing long-run aggregate supply.
B) increasing aggregate supply.
C) decreasing aggregate demand.
D) increasing aggregate demand.

Question 28

A demand-pull inflation initially is characterized by

A) increasing real output and a labor shortage.
B) increasing real output and a labor surplus.
C) decreasing real output and a labor shortage.
D) decreasing real output and a labor surplus.

Question 29

If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

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

Question 30

If demand pull inflation occurs when the economy is already at potential GDP,then following the initial increase in aggregate demand,the

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

Question 31

A demand-pull inflation requires persistent increases in

A) tax rates.
B) real wages.
C) the quantity of money.
D) government expenditures.

Question 32

A one-time rise in the price level can turn into a demand-pull inflation when ________.

A) the money wage rate continues to increase
B) the quantity of money persistently decreases
C) taxes consistently increase
D) the quantity of money persistently increases

Question 33

A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the SAS curve.

A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Question 34

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) unemployment below the natural rate.
C) upward pressure on money wage rates.
D) All of the above answers are correct.

Question 35

Suppose that a shock causes the aggregate demand curve to shift rightward.If the Fed does nothing,

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

Question 36

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, increased short-run aggregate supply, constant long-run aggregate supply
B) decreased aggregate demand, decreased short-run aggregate supply, decreased long-run aggregate supply
C) increased aggregate demand, increased short-run aggregate supply, increased long-run aggregate supply
D) increased aggregate demand, decreased short-run aggregate supply, constant long-run aggregate supply

Question 37

In a demand-pull inflation brought about by increases in the quantity of money,real GDP might increase at times because

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

Question 38

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 but the same real GDP.
B) a higher price level and an increased level of real GDP.
C) the same price level and a lower level of real GDP.
D) None of the above answers are correct.

Question 39

If the economy is at potential GDP and the Fed increases the quantity of money,then

A) potential GDP rises.
B) real GDP rises temporarily above potential GDP.
C) real GDP rises permanently above potential GDP.
D) potential GDP and real GDP both decrease.

Question 40

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) B; the natural unemployment rate
D) D; money wage rates

Question 41

Assuming that GDP currently equals potential GDP,a cost-push inflation could result from which of the following?

A) a decrease in tax rates
B) an increase in the labor force
C) a large crop failure that boosts the prices of raw food materials
D) an increase in the nation's capital stock

Question 42

As the money wage rate rises,

A) the long-run aggregate supply curve shifts rightward.
B) the short-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 43

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) demand-pull inflation resulting from persistent increases in the quantity of money.
C) cost-push inflation resulting solely from wage responses to excess labor demand.
D) cost-push inflation resulting from persistent increases in the quantity of money.

Question 44

Cost-push inflation can be started by

A) a decrease in the money wage rate.
B) an increase in the money prices of raw materials.
C) an increase in the quantity of money.
D) a decrease in government expenditure on goods and services.

Question 45

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) short-run aggregate supply shifting leftward to SAS₁.
B) short-run aggregate supply shifting leftward to SAS₂.
C) aggregate demand shifting back to AD₀.
D) aggregate demand shifting to AD₂.

Question 46

In a demand-pull inflation,money wage rates rise because

A) a decrease in aggregate demand creates a labor shortage.
B) an increase in aggregate demand creates a labor surplus.
C) an increase in aggregate demand creates a labor shortage.
D) a decrease in aggregate demand creates a labor surplus.

Question 47

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 1960s.
D) experienced this type of inflation during the 1950s.

Question 48

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) increase tax rates.
D) purchase government bonds in the open market.

Question 49

In the above figure,which path represents a demand-pull inflation?

A) point A to C to D to F to G
B) point A to B to D to E to G
C) point A to C to D to E to G
D) point A to B to D to F to G

Question 50

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

A) 1960s.
B) 2000s.
C) 1980s.
D) 1990s.

Question 51

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) rise because a labor shortage now exists.
B) fall because a labor shortage now exists.
C) rise because a labor surplus now exists.
D) fall because a labor surplus now exists.

Question 52

The main sources of cost-push inflation are increases in

A) money wage rates and the cost of raw materials.
B) real wage rates and the cost of raw materials.
C) money wage rates and aggregate demand.
D) aggregate demand and real wage rates.

Question 53

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 rightward because the Fed decreases the money supply.
B) The SAS curve shifts leftward because the money wage rate rises.
C) The AS curve shifts leftward because the money wage rate falls.
D) The AD curve shifts leftward because the money wage rate rises.

Question 54

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

Question 55

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) risen by the same percentage as the price level.
B) remained constant.
C) risen.
D) fallen.

Question 56

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 57

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 58

To prevent demand-pull inflation

A) firms must refuse to increase wages.
B) the Fed must not let the quantity of money persistently rise.
C) the natural unemployment rate must increase.
D) real GDP must increase.

Question 59

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

Question 60

In a demand-pull inflation,if the Fed stops expanding the quantity of money,

A) a cost-push inflation will occur.
B) government expenditure will cause the demand-pull inflation to continue.
C) a deflation will occur.
D) the demand-pull inflation ends.

Question 61

By itself,a fall in the price of oil shifts the

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

Question 62

The initial factors that can create a cost-push inflation do NOT include

A) increases in money wage rates.
B) increases in the money prices of raw materials.
C) increases in the quantity of money.
D) None of the above answers is correct because all of the above could be the initial cause of a cost-push inflation.

Question 63

In April 2008 the price of oil was approximately $130 per barrel; in April 2013,it was approximately $90 per barrel.This change in the price of oil could have started

A) a cost-push inflation.
B) a demand-pull inflation.
C) both a cost-push and a demand-pull inflation.
D) None of the above are correct because the fall in the price of oil does not start an inflation.

Question 64

Cost-push inflation might initially result from

A) an increase in the quantity of money.
B) the use of new technology.
C) an increase in government expenditure.
D) an increase in the cost of resources.

Question 65

Cost-push inflation starts with

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.

Question 66

Cost-push inflation can start with

A) lower taxes.
B) an increase in government expenditure.
C) higher money wage rates.
D) an increase in transfer payments.

Question 67

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) I only
B) both I and II
C) both II and III
D) III only

Question 68

A leftward shift in the aggregate supply curve

A) is the result of the Fed increasing the quantity of money.
B) is the result of a rise in the price of a key resource.
C) is the result of consumer expenditures exceeding available output.
D) increases both the price level and real GDP.

Question 69

The SAS curve shifts leftward if

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

Question 70

A higher price for oil shifts the

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

Question 71

Cost-push inflation is an inflation that results from an initial ________.

A) increase in money wage rates or money prices of raw materials
B) decrease in taxes
C) increase in investment
D) increase in taxes

Question 72

When a cost-push inflation starts

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

Question 73

Cost-push inflation can start with

A) a decrease in investment.
B) an increase in oil prices.
C) an increase in government expenditure.
D) a decrease in the quantity of money.

Question 74

At the start of a cost-push inflation,

A) productivity rises.
B) real GDP increases faster than the quantity of money.
C) the short-run aggregate supply curve shifts rightward.
D) prices and unemployment are rising.

Question 75

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

Question 76

At the start of a cost-push inflation,

A) only real GDP changes while the price level remains constant.
B) the price level and real GDP both increase.
C) the price level rises and real GDP decreases.
D) the price level rises and real GDP does not change.

Question 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; rightward
B) leftward; leftward
C) rightward; leftward
D) leftward; rightward

Question 78

Cost-push inflation starts with a

A) falling GDP and falling unemployment rate.
B) raising GDP and rising unemployment rate.
C) falling GDP and rising unemployment rate.
D) raising GDP and falling unemployment rate.

Question 79

If the prices of crucial raw materials increase,

A) the short-run aggregate supply curve shifts leftward.
B) stagflation could occur.
C) a cost-push inflation could occur depending on the behavior of the Federal Reserve.
D) All of the above answers are correct.

Question 80

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) Both I and II are correct.
C) Only III is correct.
D) Both III and IV are correct.