Question 1

A cost-price inflation spiral results if the policy response to stagflation is to keep

Accepted Answer

A) decreasing aggregate demand. 
B) decreasing short-run aggregate supply. 
C) increasing aggregate demand. 
D) increasing short-run aggregate supply. 
E) doing nothing. 
A) decreasing aggregate demand. 
B) decreasing short-run aggregate supply. 
C) increasing aggregate demand. 
D) increasing short-run aggregate supply. 
E) doing nothing.

Question 2

Use the figure below to answer the following questions.
   
Figure 28.2.2
-Refer to Figure 28.2.2.The figure illustrates an economy's Phillips curves.If the expected inflation rate changes to 3 percent,the

Accepted Answer

A) short run Phillips curve will shift upward and the long run Phillips curve will not change. 
B) short run Phillips curve will shift downward and the long run Phillips curve will not change. 
C) short run Phillips curve will shift upward and the long run Phillips curve will shift leftward. 
D) short run Phillips curve will shift upward and the long run Phillips curve will shift rightward. 
E) short run Phillips curve will shift downward and the long run Phillips curve will shift rightward. 
A) short run Phillips curve will shift upward and the long run Phillips curve will not change. 
B) short run Phillips curve will shift downward and the long run Phillips curve will not change. 
C) short run Phillips curve will shift upward and the long run Phillips curve will shift leftward. 
D) short run Phillips curve will shift upward and the long run Phillips curve will shift rightward. 
E) short run Phillips curve will shift downward and the long run Phillips curve will shift rightward.

Question 3

"Intertemporal substitution" in real business cycle theory refers to the change in the ________ as a result of the change in the real interest rate.

Accepted Answer

A) personal tax rate 
B) demand for loanable funds 
C) supply of labour 
D) consumer demand for goods 
E) demand for labour 
A) personal tax rate 
B) demand for loanable funds 
C) supply of labour 
D) consumer demand for goods 
E) demand for labour

Question 4

If the natural unemployment rate falls

Accepted Answer

A) the long-run Phillips curve shifts rightward and the short-run Phillips curve does not change. 
B) the long-run Phillips curve shifts leftward and the short-run Phillips curve does not change. 
C) the short-run Phillips curve shifts rightward. 
D) the short-run and long-run Phillips curves both shift leftward. 
E) the short-run and long-run Phillips curves both shift rightward. 
A) the long-run Phillips curve shifts rightward and the short-run Phillips curve does not change. 
B) the long-run Phillips curve shifts leftward and the short-run Phillips curve does not change. 
C) the short-run Phillips curve shifts rightward. 
D) the short-run and long-run Phillips curves both shift leftward. 
E) the short-run and long-run Phillips curves both shift rightward.

Question 5

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

Accepted Answer

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

Question 6

According to ________,the business cycle is the result of aggregate demand growing at a fluctuating rate.

Accepted Answer

A) the Keynesian cycle theory only 
B) only the Keynesian and monetarist cycle theories 
C) the Keynesian, monetarist, and real business cycle theories 
D) the Keynesian, monetarist, and new classical cycle theories 
E) real business cycle theory 
A) the Keynesian cycle theory only 
B) only the Keynesian and monetarist cycle theories 
C) the Keynesian, monetarist, and real business cycle theories 
D) the Keynesian, monetarist, and new classical cycle theories 
E) real business cycle theory

Question 7

Use the figure below to answer the following questions.
   
Figure 28.1.2
-Refer to Figure 28.1.2.The economy is in long-run equilibrium.If the short-run aggregate supply curve shifts leftward from SAS? to SAS?,ceteris paribus,then people expected

Accepted Answer

A) a 10 percent inflation. 
B) the price level to rise to 110. 
C) the real wage rate to fall by 10 percent. 
D) a real GDP decrease of $50 billion. 
E) a 15 percent inflation. 
A) a 10 percent inflation. 
B) the price level to rise to 110. 
C) the real wage rate to fall by 10 percent. 
D) a real GDP decrease of $50 billion. 
E) a 15 percent inflation.

Question 8

Use the figure below to answer the following questions.
   
Figure 28.1.3
-Refer to Figure 28.1.3.Assume that the figure illustrates an economy initially in equilibrium at the intersection of the SAS? curve and the AD? curve.If the aggregate demand curve is expected to remain at AD? but shifts to AD?,the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Accepted Answer

A) $380 billion;125 
B) $500 billion;150 
C) $500 billion;100 
D) $620 billion;125 
E) $500 billion;125 
A) $380 billion;125 
B) $500 billion;150 
C) $500 billion;100 
D) $620 billion;125 
E) $500 billion;125

Question 9

Use the figure below to answer the following questions.
   
Figure 28.2.2
-Refer to Figure 28.2.2.The figure illustrates an economy's Phillips curves.What is the natural unemployment rate?

Accepted Answer

A) 9 percent 
B) 6 percent 
C) 4 percent 
D) 7 percent 
E) cannot be determined without more information 
A) 9 percent 
B) 6 percent 
C) 4 percent 
D) 7 percent 
E) cannot be determined without more information

Question 10

Inflation resulting from an increase in aggregate demand is called

Accepted Answer

A) cost-push inflation. 
B) demand-pull inflation. 
C) anticipated inflation. 
D) unanticipated inflation. 
E) political inflation. 
A) cost-push inflation. 
B) demand-pull inflation. 
C) anticipated inflation. 
D) unanticipated inflation. 
E) political inflation.

Question 11

Along the short-run Phillips curve,if the actual unemployment rate falls below the natural unemployment rate,the

Accepted Answer

A) actual inflation rate will be equal to the expected inflation rate. 
B) actual inflation rate will be greater than the expected inflation rate. 
C) actual inflation rate will be less than the expected inflation rate. 
D) actual inflation rate may be greater than, equal to, or less than the expected inflation rate 
E) expected inflation rate will fall to zero. 
A) actual inflation rate will be equal to the expected inflation rate. 
B) actual inflation rate will be greater than the expected inflation rate. 
C) actual inflation rate will be less than the expected inflation rate. 
D) actual inflation rate may be greater than, equal to, or less than the expected inflation rate 
E) expected inflation rate will fall to zero.

Question 12

Use the figure below to answer the following question.
   
Figure 28.1.5
-Refer to Figure 28.1.5.Which one of the graphs in the figure represents an economy with the price level expected to remain constant?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) none of the above 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) none of the above

Question 13

Demand-pull inflation occurs when

Accepted Answer

A) aggregate demand increases. 
B) aggregate supply decreases. 
C) input costs rise. 
D) people incorrectly forecast inflation. 
E) unemployment is above the natural rate. 
A) aggregate demand increases. 
B) aggregate supply decreases. 
C) input costs rise. 
D) people incorrectly forecast inflation. 
E) unemployment is above the natural rate.

Question 14

Both new Keynesian and new classical cycle theories claim that

Accepted Answer

A) animal spirits can trigger a business cycle. 
B) shifts in the SAS curve are the main impulse for a business cycle. 
C) unexpected changes in aggregate demand trigger a business cycle. 
D) expected changes in the quantity of money can trigger a business cycle. 
E) a change in the price of oil is the major cause of a business cycle. 
A) animal spirits can trigger a business cycle. 
B) shifts in the SAS curve are the main impulse for a business cycle. 
C) unexpected changes in aggregate demand trigger a business cycle. 
D) expected changes in the quantity of money can trigger a business cycle. 
E) a change in the price of oil is the major cause of a business cycle.

Question 15

The new classical theory argues that the primary factor leading to business cycles is

Accepted Answer

A) expected fluctuations in aggregate demand. 
B) expected fluctuations in short-run aggregate supply. 
C) unexpected fluctuations in aggregate demand. 
D) unexpected fluctuations in short-run aggregate supply. 
E) unexpected fluctuations in long-run aggregate supply. 
A) expected fluctuations in aggregate demand. 
B) expected fluctuations in short-run aggregate supply. 
C) unexpected fluctuations in aggregate demand. 
D) unexpected fluctuations in short-run aggregate supply. 
E) unexpected fluctuations in long-run aggregate supply.

Question 16

The factor leading to business cycles in the ________ cycle theory is unexpected fluctuations in aggregate demand while in the ________ cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

Accepted Answer

A) new classical;monetarist 
B) new classical;new Keynesian 
C) new Keynesian;Keynesian 
D) monetarist;new Keynesian 
E) real business;monetarist 
A) new classical;monetarist 
B) new classical;new Keynesian 
C) new Keynesian;Keynesian 
D) monetarist;new Keynesian 
E) real business;monetarist

Question 17

The Canadian short-run Phillips curve ________ when the expected inflation rate rises and ________ when the expected inflation rate falls.
The Canadian short-run Phillips curve ________ when the natural unemployment rate increases and ________ when the natural unemployment rate decreases.

Accepted Answer

A) shifts downward;shifts upward;shifts rightward;shifts leftward 
B) does not shift;does not shift;shifts rightward;shifts leftward 
C) shifts upward;shifts downward;does not shift;does not shift 
D) shifts upward;shifts downward;shifts rightward;shifts leftward 
E) shifts upward;does not shift;shifts rightward;does not shift 
A) shifts downward;shifts upward;shifts rightward;shifts leftward 
B) does not shift;does not shift;shifts rightward;shifts leftward 
C) shifts upward;shifts downward;does not shift;does not shift 
D) shifts upward;shifts downward;shifts rightward;shifts leftward 
E) shifts upward;does not shift;shifts rightward;does not shift

Question 18

If the inflation rate is lower than the expected inflation rate,

Accepted Answer

A) unemployment is above the natural rate. 
B) the natural unemployment rate will increase. 
C) the expected inflation rate will increase. 
D) unemployment is below the natural rate. 
E) the economy is not operating on the short-run Phillips curve. 
A) unemployment is above the natural rate. 
B) the natural unemployment rate will increase. 
C) the expected inflation rate will increase. 
D) unemployment is below the natural rate. 
E) the economy is not operating on the short-run Phillips curve.

Question 19

Use the figure below to answer the following question.
   
Figure 28.1.6
-Refer to Figure 28.1.6.Starting at point A,the initial effect of a cost-push inflation is a move to point ________.As a cost-push inflation spiral proceeds,it follows the path ________.

Accepted Answer

A) C;B, H, G, I 
B) C;E, H, I 
C) B;E, G, I 
D) E;I 
E) C;F 
A) C;B, H, G, I 
B) C;E, H, I 
C) B;E, G, I 
D) E;I 
E) C;F

Question 20

Use the figure below to answer the following questions.
   
Figure 28.3.1
-Refer to Figure 28.3.1.Suppose the economy moves from point D to point B.According to the monetarist theory of the business cycle,what could have caused this movement?

Accepted Answer

A) a decrease in the money wage rate 
B) an increase in uncertainty about future sales and profits 
C) an increase in the growth rate of the quantity of money 
D) an increase in the money wage rate 
E) a decrease in exports 
A) a decrease in the money wage rate 
B) an increase in uncertainty about future sales and profits 
C) an increase in the growth rate of the quantity of money 
D) an increase in the money wage rate 
E) a decrease in exports

Exam 28: Canadian Inflation, Unemployment, and Business Cycle

A cost-price inflation spiral results if the policy response to stagflation is to keep

Use the figure below to answer the following questions. Figure 28.2.2 -Refer to Figure 28.2.2.The figure illustrates an economy's Phillips curves.If the expected inflation rate changes to 3 percent,the

"Intertemporal substitution" in real business cycle theory refers to the change in the ________ as a result of the change in the real interest rate.

If the natural unemployment rate falls

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

According to ________,the business cycle is the result of aggregate demand growing at a fluctuating rate.

Use the figure below to answer the following questions. Figure 28.1.2 -Refer to Figure 28.1.2.The economy is in long-run equilibrium.If the short-run aggregate supply curve shifts leftward from SAS? to SAS?,ceteris paribus,then people expected

Use the figure below to answer the following questions. Figure 28.2.2 -Refer to Figure 28.2.2.The figure illustrates an economy's Phillips curves.What is the natural unemployment rate?

Inflation resulting from an increase in aggregate demand is called

Along the short-run Phillips curve,if the actual unemployment rate falls below the natural unemployment rate,the

Use the figure below to answer the following question. Figure 28.1.5 -Refer to Figure 28.1.5.Which one of the graphs in the figure represents an economy with the price level expected to remain constant?

Demand-pull inflation occurs when

Both new Keynesian and new classical cycle theories claim that

The new classical theory argues that the primary factor leading to business cycles is

The factor leading to business cycles in the ________ cycle theory is unexpected fluctuations in aggregate demand while in the ________ cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

The Canadian short-run Phillips curve ________ when the expected inflation rate rises and ________ when the expected inflation rate falls. The Canadian short-run Phillips curve ________ when the natural unemployment rate increases and ________ when the natural unemployment rate decreases.

If the inflation rate is lower than the expected inflation rate,

Use the figure below to answer the following question. Figure 28.1.6 -Refer to Figure 28.1.6.Starting at point A,the initial effect of a cost-push inflation is a move to point ________.As a cost-push inflation spiral proceeds,it follows the path ________.

Use the figure below to answer the following questions. Figure 28.3.1 -Refer to Figure 28.3.1.Suppose the economy moves from point D to point B.According to the monetarist theory of the business cycle,what could have caused this movement?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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

Filters

The factor leading to business cycles in the cycle theory is unexpected fluctuations in aggregate demand while in the cycle theory both unexpected and expected fluctuations in aggregate demand are factors that lead to business cycles.

The Canadian short-run Phillips curve when the expected inflation rate rises and when the expected inflation rate falls. The Canadian short-run Phillips curve when the natural unemployment rate increases and when the natural unemployment rate decreases.

Use the figure below to answer the following question. Figure 28.1.6 -Refer to Figure 28.1.6.Starting at point A,the initial effect of a cost-push inflation is a move to point .As a cost-push inflation spiral proceeds,it follows the path .