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

-In the above figure, suppose that the economy is at point C. If the inflation rate is lower than expected,

Which theory assumes that business cycles occur because of changes in business confidence?

The states that the main source of economic fluctuations is volatile business confidence.

Which of the following results in the aggregate demand curve shifting rightward year after year?

Describe how a cost- push inflation can occur.

According to the theory, a decrease in productivity growth will shift the _ and trigger a business cycle.

-In the above figure, suppose that the economy currently is at point A. If the inflation rate falls and this fall is unanticipated by the public, the economy moves to a point such as point

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 p III. result initially in lower employment and a higher price level.

Increases in the quantity of money can create demand- pull inflation.

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

In the new Keynesian business cycle theory, can effect real GDP.

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

If people correctly anticipate an increase in inflation so that their money wage rate adjusts immediately, then, assuming the economy is initially at potential GDP,

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

Keynes used the term "animal spirits" to represent

Suppose oil prices rise and the economy suffers a stagflation. If the Fed responds by increasing the quantity of money, then in the short run

Suppose oil prices rise. The Fed can _ the quantity of money to the unemployment rate back to its natural rate.

-In the above, which figure shows the start of a cost- push inflation?

-In the above figure, suppose the economy starts at point A. The short- run response to an increase in the growth rate of the quantity of money in monetarist business cycle theory moves the economy to point

In a story from HYPERLINK "http://www.ft.com/" www.ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy it was noted that "Ireland's story is unique: a small, English- speaking, non- industrialised country on the edge of Europe was able to secure structural funds from the EU, cut taxes, deregulate than its neighbours and attract lots of foreign companies in the process." If the natural rate of unemployment in Ireland decreased as a result of these policies, there would be