Question 1

What factors can start a cost- push inflation? What must the Fed's response be for the inflation to continue?

Accepted Answer

Cost push inflation starts with a decrea

Question 2

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

Accepted Answer

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

Question 3

-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 the monetarist business cycle theory is for the price level to _ and real GDP to .

Accepted Answer

A)  rise to 120; increase to $12 trillion 
B)  remain at 110; remain at $10 trillion 
C)  fall to 90; remain at $10 trillion 
D)  rise to 130; remain at $10 trillion 
A)  rise to 120; increase to $12 trillion 
B)  remain at 110; remain at $10 trillion 
C)  fall to 90; remain at $10 trillion 
D)  rise to 130; remain at $10 trillion

Question 4

According to real business cycle (RBC) theory, a change in the quantity of money leads to

Accepted Answer

A)  a change in the price level but no change in real GDP. 
B)  a change in investment and real GDP. 
C)  a change in the price level and in real GDP. 
D)  a change in the real wage rate and the money wage rate. 
A)  a change in the price level but no change in real GDP. 
B)  a change in investment and real GDP. 
C)  a change in the price level and in real GDP. 
D)  a change in the real wage rate and the money wage rate.

Question 5

In monetarist business cycle theory, the factor leading to a business cycle is changes in

Accepted Answer

A)  investment spending. 
B)  the growth rate of the quantity of money. 
C)  net exports. 
D)  consumer spending. 
A)  investment spending. 
B)  the growth rate of the quantity of money. 
C)  net exports. 
D)  consumer spending.

Question 6

Which of the diagrams in the above figure best illustrates a long- run Phillips curve?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  neither Figure A nor Figure B 
D)  both Figure A and Figure B 
A)  Figure A 
B)  Figure B 
C)  neither Figure A nor Figure B 
D)  both Figure A and Figure B

Question 7

Discuss the relationship between the short- run aggregate supply curve and the short- run Phillips curve.

Accepted Answer

The short- run Phillips curve and the sh

Question 8

Stagflation occurs when the price level and real GDP .

Accepted Answer

A)  falls; increases 
B)  rises; decreases 
C)  rises; increases 
D)  falls; decreases 
A)  falls; increases 
B)  rises; decreases 
C)  rises; increases 
D)  falls; decreases

Question 9

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

Accepted Answer

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

Question 10

Looking at U.S. economic history between 1960 and 2005, we see that growth in real GDP

Accepted Answer

A)  falls following an increase in productivity growth. 
B)  rises following a decrease in productivity growth. 
C)  rises following an increase in productivity growth. 
D)  was not correlated with fluctuations in productivity growth. 
A)  falls following an increase in productivity growth. 
B)  rises following a decrease in productivity growth. 
C)  rises following an increase in productivity growth. 
D)  was not correlated with fluctuations in productivity growth.

Question 11

The short- run Phillips curve shows the relationship between

Accepted Answer

A)  the price level and unemployment in the short run. 
B)  the price level and real GDP in the short run. 
C)  inflation and unemployment when expected inflation equals the actual inflation. 
D)  inflation and unemployment when expected inflation does not change. 
A)  the price level and unemployment in the short run. 
B)  the price level and real GDP in the short run. 
C)  inflation and unemployment when expected inflation equals the actual inflation. 
D)  inflation and unemployment when expected inflation does not change.

Question 12

Keynes used the term "animal spirits" to refer to the

Accepted Answer

A)  irrational behavior of financial markets. 
B)  volatility of business confidence. 
C)  animalistic behavior of investors. 
D)  all of the above 
A)  irrational behavior of financial markets. 
B)  volatility of business confidence. 
C)  animalistic behavior of investors. 
D)  all of the above

Question 13

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

Accepted Answer

A)  new classical cycle theory 
B)  real business cycle theory 
C)  Keynesian cycle theory 
D)  monetarist cycle theory 
A)  new classical cycle theory 
B)  real business cycle theory 
C)  Keynesian cycle theory 
D)  monetarist cycle theory

Question 14

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, _ .

Accepted Answer

A)  real GDP decreases below potential GDP 
B)  real GDP increases above potential GDP 
C)  real GDP remains at potential GDP 
D)  long- run aggregate supply decreases 
A)  real GDP decreases below potential GDP 
B)  real GDP increases above potential GDP 
C)  real GDP remains at potential GDP 
D)  long- run aggregate supply decreases

Question 15

In a real business cycle model, labor supply

Accepted Answer

A)  decreases if the real interest rate rises. 
B)  increases if the nominal interest rate rises. 
C)  is independent of the real interest rate. 
D)  decreases if the real interest rate falls. 
A)  decreases if the real interest rate rises. 
B)  increases if the nominal interest rate rises. 
C)  is independent of the real interest rate. 
D)  decreases if the real interest rate falls.

Question 16

In a persisting demand- pull inflation

Accepted Answer

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

Question 17

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." As these policies were implemented investment steadily increased in Ireland and potential GDP increased.
These changes would be shown as
i. rightward shifts of the AD curve
ii. leftward shifts of the SAS curve
iii. rightward shifts of the LAS curve

Accepted Answer

A)  i and ii only. 
B)  ii and iii only. 
C)  i and iii. 
D)  i, ii and iii. 
A)  i and ii only. 
B)  ii and iii only. 
C)  i and iii. 
D)  i, ii and iii.

Question 18

What is demand- pull inflation?

Accepted Answer

An inflation that st

Question 19

Demand- pull inflation can start when

Accepted Answer

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

Question 20

The figure above shows the initial aggregate demand curve, AD0, the initial short- run aggregate supply curve, SAS0, and the long- run aggregate supply curve, LAS. The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium. The economy
is initially at point A. Atlantia's Central Bank then increases the quantity of money year after year. Draw the nece curves in the figure to show the effects of this on Atlantia's real GDP and price level.
a) What happens to Atlantia's potential GDP?
b) In the short run, what happens to aggregate supply and aggregate demand?
c) What are the new short- run equilibrium real GDP and price level?
d) In the long run, what happens to aggregate supply and aggregate demand?
e) In the long run, what process is unfolding?

Accepted Answer

@#IMG-DLM& b) See the figure above. The increase i

What factors can start a cost- push inflation? What must the Fed's response be for the inflation to continue?

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

-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 the monetarist business cycle theory is for the price level to _ and real GDP to .

According to real business cycle (RBC) theory, a change in the quantity of money leads to

In monetarist business cycle theory, the factor leading to a business cycle is changes in

Which of the diagrams in the above figure best illustrates a long- run Phillips curve?

Discuss the relationship between the short- run aggregate supply curve and the short- run Phillips curve.

Stagflation occurs when the price level and real GDP .

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

Looking at U.S. economic history between 1960 and 2005, we see that growth in real GDP

The short- run Phillips curve shows the relationship between

Keynes used the term "animal spirits" to refer to the

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, _ .

In a real business cycle model, labor supply

In a persisting demand- pull inflation

What is demand- pull inflation?

Demand- pull inflation can start when

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

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

What factors can start a cost- push inflation? What must the Fed's response be for the inflation to continue?

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

-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 the monetarist business cycle theory is for the price level to _ and real GDP to .

According to real business cycle (RBC) theory, a change in the quantity of money leads to

In monetarist business cycle theory, the factor leading to a business cycle is changes in

Which of the diagrams in the above figure best illustrates a long- run Phillips curve?

Discuss the relationship between the short- run aggregate supply curve and the short- run Phillips curve.

Stagflation occurs when the price level and real GDP .

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

Looking at U.S. economic history between 1960 and 2005, we see that growth in real GDP

The short- run Phillips curve shows the relationship between

Keynes used the term "animal spirits" to refer to the

Which theory emphasizes frequent changes in investment because of "animal spirits" as the main source of economic fluctuations?

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase. Other things remaining the same, _ .

In a real business cycle model, labor supply

In a persisting demand- pull inflation

What is demand- pull inflation?

Demand- pull inflation can start when

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: They Keynesian Model

Fiscal Policy

Monetary Policy

International Trade Policy

Filters