Question 1

Which of the following pieces of evidence is most consistent with the real business cycle theory?

Accepted Answer

A)  Productivity and GDP move closely together. 
B)  Labor supply decisions do not seem to depend on real interest rates. 
C)  Money wage rates take some time to adjust to price changes. 
D)  Real GDP and the quantity of money move closely together. 
A)  Productivity and GDP move closely together. 
B)  Labor supply decisions do not seem to depend on real interest rates. 
C)  Money wage rates take some time to adjust to price changes. 
D)  Real GDP and the quantity of money move closely together.

Question 2

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

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 3

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

Accepted Answer

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

Question 4

Stagflation is associated with

Accepted Answer

A)  neither cost-push inflation or demand-pull inflation because it is a different concept altogether. 
B)  both types of inflation. 
C)  cost-push inflation. 
D)  demand-pull inflation. 
A)  neither cost-push inflation or demand-pull inflation because it is a different concept altogether. 
B)  both types of inflation. 
C)  cost-push inflation. 
D)  demand-pull inflation.

Question 5

-In the above figure, the economy is at point A. The inflation rate unexpectedly falls by two percentage points. As a result, the economy moves to point

Accepted Answer

A)  A, that is, there is no movement. 
B)  B. 
C)  C. 
D)  D. 
A)  A, that is, there is no movement. 
B)  B. 
C)  C. 
D)  D.

Question 6

Suppose that an economist finds that in most recessions, which are times when employment is low, that real interest rates are extremely high. This finding would pose the biggest problem for the

Accepted Answer

A)  Keynesian theory of the business cycle. 
B)  real business cycle theory. 
C)  new Keynesian theory of the business cycle. 
D)  new classical theory of the business cycle. 
A)  Keynesian theory of the business cycle. 
B)  real business cycle theory. 
C)  new Keynesian theory of the business cycle. 
D)  new classical theory of the business cycle.

Question 7

During a cost-push inflation spiral, the money wage rate ___________and the quantity of money ___________

Accepted Answer

A)  does not change; does not change 
B)  does not change; increases 
C)  increases; does not change 
D)  increases; increases 
A)  does not change; does not change 
B)  does not change; increases 
C)  increases; does not change 
D)  increases; increases

Question 8

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

Accepted Answer

A)  an increase in imports 
B)  a decrease in the quantity of money 
C)  an increase in government expenditure 
D)  an increase in the money prices of raw materials 
A)  an increase in imports 
B)  a decrease in the quantity of money 
C)  an increase in government expenditure 
D)  an increase in the money prices of raw materials

Question 9

A key difference between the new classical and the new Keynesian views of the business cycle is the role played by

Accepted Answer

A)  expected changes in aggregate demand. 
B)  the growth rate of the quantity of money. 
C)  government expenditure on goods and services. 
D)  unexpected changes in aggregate demand. 
A)  expected changes in aggregate demand. 
B)  the growth rate of the quantity of money. 
C)  government expenditure on goods and services. 
D)  unexpected changes in aggregate demand.

Question 10

A rational expectation is

Accepted Answer

A)  an incorrect forecast. 
B)  not necessarily correct but is the best available forecast. 
C)  necessarily correct because it is the best available forecast. 
D)  a correct forecast but it might not be the best available forecast. 
A)  an incorrect forecast. 
B)  not necessarily correct but is the best available forecast. 
C)  necessarily correct because it is the best available forecast. 
D)  a correct forecast but it might not be the best available forecast.

Question 11

Which of the following are TRUE?
I. New Keynesian economists believe that money wage rates are influenced by rational expectations of the price level.
II. New classical economists believe that money wage rates are influenced by rational expectations of the price level.
III. New classical economists believe expected changes in aggregate demand trigger business cycles.

Accepted Answer

A)  I, II and III 
B)  II and III 
C)  I and II 
D)  I and III 
A)  I, II and III 
B)  II and III 
C)  I and II 
D)  I and III

Question 12

Critics of the real business cycle theory claim that

Accepted Answer

A)  changes in technology cannot cause economic growth. 
B)  the intertemporal substitution effect is too weak to account for changes in labor supply. 
C)  both real and nominal variables change during the business cycle. 
D)  Both answers B and C are correct. 
A)  changes in technology cannot cause economic growth. 
B)  the intertemporal substitution effect is too weak to account for changes in labor supply. 
C)  both real and nominal variables change during the business cycle. 
D)  Both answers B and C are correct.

Question 13

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

Accepted Answer

In the long run, there is no tradeoff be

Question 14

-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 130; remain at $13 trillion 
B)  fall to 90; remain at $13 trillion 
C)  remain at 110; remain at $13 trillion 
D)  rise to 120; increase to $15 trillion 
A)  rise to 130; remain at $13 trillion 
B)  fall to 90; remain at $13 trillion 
C)  remain at 110; remain at $13 trillion 
D)  rise to 120; increase to $15 trillion

Question 15

A cost-push inflation spiral results if the Fedʹs response to stagflation is to keep

Accepted Answer

A)  decreasing aggregate demand. 
B)  decreasing aggregate supply. 
C)  increasing aggregate supply. 
D)  increasing aggregate demand. 
A)  decreasing aggregate demand. 
B)  decreasing aggregate supply. 
C)  increasing aggregate supply. 
D)  increasing aggregate demand.

Question 16

According to which theory of the business cycle do changes in the quantity of money never play a role in helping to explaining fluctuations in real variables?

Accepted Answer

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

Question 17

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

Accepted Answer

A)  new classical cycle theory 
B)  new Keynesian cycle theory 
C)  real business cycle theory 
D)  Both answers A and B are correct. 
A)  new classical cycle theory 
B)  new Keynesian cycle theory 
C)  real business cycle theory 
D)  Both answers A and B are correct.

Question 18

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

Accepted Answer

A) True 
 B)False

Question 19

What are criticisms of the real business cycle theory?

Accepted Answer

Four criticisms of the real business cyc

Question 20

The short-run Phillips curve gives much the same information as

Accepted Answer

A)  the SAS curve. 
B)  the LAS curve. 
C)  the AD curve. 
D)  none of the above 
A)  the SAS curve. 
B)  the LAS curve. 
C)  the AD curve. 
D)  none of the above

Which of the following pieces of evidence is most consistent with the real business cycle theory?

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

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

Stagflation is associated with

-In the above figure, the economy is at point A. The inflation rate unexpectedly falls by two percentage points. As a result, the economy moves to point

Suppose that an economist finds that in most recessions, which are times when employment is low, that real interest rates are extremely high. This finding would pose the biggest problem for the

During a cost-push inflation spiral, the money wage rate _and the quantity of money _

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

A key difference between the new classical and the new Keynesian views of the business cycle is the role played by

A rational expectation is

Critics of the real business cycle theory claim that

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

-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 .

A cost-push inflation spiral results if the Fedʹs response to stagflation is to keep

According to which theory of the business cycle do changes in the quantity of money never play a role in helping to explaining fluctuations in real variables?

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

What are criticisms of the real business cycle theory?

The short-run Phillips curve gives much the same information as

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: the Keynesian Model

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

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

Which of the following pieces of evidence is most consistent with the real business cycle theory?

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

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

Stagflation is associated with

-In the above figure, the economy is at point A. The inflation rate unexpectedly falls by two percentage points. As a result, the economy moves to point

Suppose that an economist finds that in most recessions, which are times when employment is low, that real interest rates are extremely high. This finding would pose the biggest problem for the

During a cost-push inflation spiral, the money wage rate ___________and the quantity of money ___________

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

A key difference between the new classical and the new Keynesian views of the business cycle is the role played by

A rational expectation is

Critics of the real business cycle theory claim that

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

-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__________ .

A cost-push inflation spiral results if the Fedʹs response to stagflation is to keep

According to which theory of the business cycle do changes in the quantity of money never play a role in helping to explaining fluctuations in real variables?

Suppose the data show that an unexpected change in tax rates caused a recent recession. These data support which model of the business cycle?

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

What are criticisms of the real business cycle theory?

The short-run Phillips curve gives much the same information as

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: the Keynesian Model

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

During a cost-push inflation spiral, the money wage rate _and the quantity of money _

-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 .