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

-An economy is in long- run equilibrium and the price level is 100 in the figure above. Aggregate demand increases and the aggregate demand curve shifts to AD₁. If the increase in aggregate demand is expected, then the inflation rate is .

-In the above figure, suppose the economy is at point A. An expected increase in the inflation rate to 6 percent will result in a movement to point

A change in the natural unemployment rate .

The factor that leads to business cycles within Keynesian cycle theory is

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

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?

When the expected inflation rate changes, what happens to the short- run Phillips curve? To the long- run Phillips curve?

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

A story from HYPERLINK "http://www.ft.com/" www.ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy 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 faster 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, then _ shift .

A movement along the SAS curve that brings a lower price level and a decrease in real GDP is equivalent to a

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

Stagflation is associated with

The Phillips curve describes the relationship between real GDP and inflation.

Real business cycle theory explains the business cycle as the result of

Real business cycle economists claim that the intertemporal substitution effect

The long- run Phillips curve slopes downward.

-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 AD₁, the inflation rate is )

In a story from HYPERLINK "http://www.Forbes.com/" www.Forbes.com (5/30/2003), it was reported that the Chief Technology Officer of th plans for the country to spend $58.1 billion on technology that year. He was planning to buy technol from Cisco Systems, Oracle and Sun Microsystems in addition to other software makers. This story reports on technological change which is the stressed in the of business cycles.

The long- run Phillips curve

According to the business cycle is the result of shifts in the economy's AD curve.