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

Inflation rate (percent per year) Unemployment rate (percent) 8 3 6 4 4 5 2 6 -An economy?s natural unemployment rate is 4 percent. The table above gives some points on the economy?s short-run Phillips curve. If the expected inflation rate becomes 8 percent per year, then the ___________

The long-run Phillips curve is ___________.

When workers and employers correctly anticipate an increase in inflation caused by an increase in aggregate demand,

Fluctuations in business confidence is the factor leading to business cycles in the__________ .

Suppose that the Federal Reserve is expected to expand the quantity of money by 5 percent but ends up expanding it by only 2 percent. If the new Keynesian theory is correct, which of the following describes the effect on the economy?

Suppose aggregate demand increases by more than expected. Which of the following describes what will occur?

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

The new classical cycle theory views anticipated fluctuations in aggregate demand as the main source of business cycle economic fluctuations.

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, 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 one-time increase in aggregate demand creates inflation.

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

-In the above figure, the movement from point A to B to C to D to E represents

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

A demand-pull inflation consists of ___________shifts in the AD curve and___________ shifts in the SAS curve.

Suppose the growth rate of the quantity of money increased from 5 percent per year to 8 percent per year. According to the__________ , this event would trigger a business cycle expansion.

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

If oil prices increase, then in the short run, real GDP will ___________and the price level will___________

A decrease in the expected inflation rate shifts the short-run Phillips curve

A rational expectation of inflation is