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

As world economies recover from the financial crisis in 2008 and 2009, the U.S. economy returns to full employment and expected inflation equals actual inflation,

The short run Phillips curve is vertical at the natural unemployment rate.

The new classical cycle theory predicts that an unexpected increase in aggregate demand create a business cycle and an expected increase in aggregate demand create a business cycle.

Which of the following statements about a cost- push inflation is correct?

The main sources of cost- push inflation are increases in

The short- run Phillips curve and the long- run Phillips curve intersect at the and )

Suppose that in response to a decrease in real interest rates, a person decides to reduce his labor supply today and increase it in the future. This behavior is most consistent with the

-In the above figure, suppose that the economy currently is at point A. If the inflation rate rises and this rise is NOT anticipated by the public, the economy moves to a point such as point

Initially, demand- pull inflation will

In the long run, what is the tradeoff between inflation and unemployment? Explain your answer using Phillips curve analysis.

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

Distinguish between the short- run and long- run Phillips curves.

As far as cost- push inflation goes, the United States

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

How do defenders of the real business cycle theory, (RBC theory) respond to critics of the theory?

For monetarists the main cause of economic fluctuations is changes in

Both the new classical and new Keynesian business cycle theories agree that

A direct way to study inflation and unemployment is by using .

In the above figure, suppose the economy is at point A. The movement from point B to C to D to E Could result from continual increases in the

The business cycle impulse in the new classical theory of the business cycle is