Question 1

In real business cycle theory,the supply of labour

Accepted Answer

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

Question 2

Which of the following are business cycle theories that regard fluctuations in aggregate demand as the factor that creates business cycles?
I.Keynesian cycle theory
II.real business cycle theory
III.monetarist cycle theory

Accepted Answer

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

Question 3

Stagflation occurs when the economy experiences both

Accepted Answer

A) rising inflation and increasing real GDP. 
B) falling inflation and decreasing real GDP. 
C) rising inflation and decreasing real GDP. 
D) falling inflation and increasing real GDP. 
E) low exports and low imports. 
A) rising inflation and increasing real GDP. 
B) falling inflation and decreasing real GDP. 
C) rising inflation and decreasing real GDP. 
D) falling inflation and increasing real GDP. 
E) low exports and low imports.

Question 4

For a given expected inflation rate,the higher the unemployment rate,the lower is the actual inflation rate.This relationship is the ________ Phillips curve.When the expected inflation rate changes,this is shown as a movement along the ________ Phillips curve.

Accepted Answer

A) short-run;short-run 
B) long-run;long-run 
C) long-run;natural 
D) natural;short-run 
E) short-run;long-run 
A) short-run;short-run 
B) long-run;long-run 
C) long-run;natural 
D) natural;short-run 
E) short-run;long-run

Question 5

If there is a fully anticipated increase in the inflation rate

Accepted Answer

A) unemployment will be below the natural rate. 
B) unemployment will be above the natural rate. 
C) the natural unemployment rate will increase. 
D) the economy is not operating on the LRPC curve. 
E) the economy is operating on the LRPC curve. 
A) unemployment will be below the natural rate. 
B) unemployment will be above the natural rate. 
C) the natural unemployment rate will increase. 
D) the economy is not operating on the LRPC curve. 
E) the economy is operating on the LRPC curve.

Question 6

In real business cycle theory,________ are the main source of economic fluctuations.

Accepted Answer

A) unexpected changes in government expenditure 
B) random fluctuations in investment 
C) random fluctuations in productivity 
D) unexpected changes in the full-employment quantity of labour 
E) changes in the quantity of money 
A) unexpected changes in government expenditure 
B) random fluctuations in investment 
C) random fluctuations in productivity 
D) unexpected changes in the full-employment quantity of labour 
E) changes in the quantity of money

Question 7

According to real business cycle theory,a fall in the real interest rate ________ the supply of labour and ________ employment.

Accepted Answer

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

Question 8

According to real business cycle theory,if the Bank of Canada increases the quantity of money when real GDP decreases,real GDP

Accepted Answer

A) will increase but only temporarily. 
B) will increase permanently. 
C) and the price level will both be unaffected. 
D) will be unaffected, but the price level will rise. 
E) will decrease due to the inefficiencies introduced into production as a result. 
A) will increase but only temporarily. 
B) will increase permanently. 
C) and the price level will both be unaffected. 
D) will be unaffected, but the price level will rise. 
E) will decrease due to the inefficiencies introduced into production as a result.

Question 9

Suppose that a severe shock that decreases the demand for loanable funds hits Canada.Which of the following can we expect to occur according to real business cycle theory?

Accepted Answer

A) The real interest rate will fall. 
B) People will work fewer hours. 
C) The real wage rate will fall. 
D) The demand for loanable funds will decrease. 
E) All of the above are true. 
A) The real interest rate will fall. 
B) People will work fewer hours. 
C) The real wage rate will fall. 
D) The demand for loanable funds will decrease. 
E) All of the above are true.

Question 10

If the natural unemployment rate increases,the long-run Phillips curve ________,the short-run Phillips curve ________,and the expected inflation rate ________.

Accepted Answer

A) does not shift;does not shift;does not change 
B) shifts rightward;shifts rightward;does not change 
C) does not shift;shifts rightward;rises 
D) shifts rightward;curve does not shift;falls 
E) shifts rightward;shifts rightward;falls 
A) does not shift;does not shift;does not change 
B) shifts rightward;shifts rightward;does not change 
C) does not shift;shifts rightward;rises 
D) shifts rightward;curve does not shift;falls 
E) shifts rightward;shifts rightward;falls

Question 11

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 shift to AD? but remains at AD?,the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Accepted Answer

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

Question 12

According to the real business cycle theory,what effects follow from a change in productivity?
I.Investment demand changes.
II.The demand for labour changes.
III.Government expenditure changes.

Accepted Answer

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

Question 13

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 current inflation rate is 4 percent,what is the current unemployment rate?

Accepted Answer

A) 9 percent 
B) 6 percent 
C) 4 percent 
D) 3 percent 
E) cannot be determined without more information 
A) 9 percent 
B) 6 percent 
C) 4 percent 
D) 3 percent 
E) cannot be determined without more information

Question 14

In real business cycle theory,the supply of labour

Accepted Answer

A) increases if the real interest rate falls. 
B) increases if the real interest rate rises. 
C) increases if the demand for labour decreases. 
D) is not influenced by changes in the real interest rate. 
E) increases if the demand for loanable funds decreases. 
A) increases if the real interest rate falls. 
B) increases if the real interest rate rises. 
C) increases if the demand for labour decreases. 
D) is not influenced by changes in the real interest rate. 
E) increases if the demand for loanable funds decreases.

Question 15

At full employment an increase in the quantity of money (ceteris paribus)can create a

Accepted Answer

A) demand-pull inflation, as can an increase in government expenditure. 
B) demand-pull inflation, but an increase in government expenditure cannot. 
C) cost-push inflation, as can an increase in government expenditure. 
D) cost-push inflation, but an increase in government expenditure cannot. 
E) demand-pull and a cost-push inflation, as can an increase in government expenditure. 
A) demand-pull inflation, as can an increase in government expenditure. 
B) demand-pull inflation, but an increase in government expenditure cannot. 
C) cost-push inflation, as can an increase in government expenditure. 
D) cost-push inflation, but an increase in government expenditure cannot. 
E) demand-pull and a cost-push inflation, as can an increase in government expenditure.

Question 16

Use the table below to answer the following questions.
Table 28.2.1
  
-Refer to Table 28.2.1.The table gives points on the short-run Phillips curve for the country of Ruritania.If the expected inflation rate is 10 percent,and the inflation rate unexpectedly rises to 12 percent and stays there for some period of time,the expected inflation rate becomes ________ percent and the natural unemployment rate is ________ percent.

Accepted Answer

A) 12;4 
B) 10;4 
C) 10;6 
D) 12;6 
E) 12;5 
A) 12;4 
B) 10;4 
C) 10;6 
D) 12;6 
E) 12;5

Question 17

Suppose that the business cycle in Canada is best described by RBC theory.
An advance in technology increases productivity.
The when-to-work decision depends on the real interest rate.The ________ the real interest rate,other things remaining the same,the ________ is the supply of labour today.
RBC theorists believe the when-to-work effect is ________.

Accepted Answer

A) lower;smaller;small 
B) higher;smaller;small 
C) higher;larger;large 
D) lower;larger;large 
E) higher;larger;small 
A) lower;smaller;small 
B) higher;smaller;small 
C) higher;larger;large 
D) lower;larger;large 
E) higher;larger;small

Question 18

Use the table below to answer the following questions.
Table 28.2.1
  
-Refer to Table 28.2.1.The table gives points on the short-run Phillips curve for the country of Ruritania.If the expected inflation rate is 10 percent,and the inflation rate unexpectedly rises to 12 percent,what is the unemployment rate?

Accepted Answer

A) 4 percent 
B) 5 percent 
C) 6 percent 
D) 7 percent 
E) 9 percent 
A) 4 percent 
B) 5 percent 
C) 6 percent 
D) 7 percent 
E) 9 percent

Question 19

Which of the following would cause the aggregate demand curve to keep shifting rightward year after year?

Accepted Answer

A) a one-time tax cut 
B) a one-time increase in government expenditures on goods and services 
C) inflation 
D) excess wage demands 
E) a persistent increase in the quantity of money 
A) a one-time tax cut 
B) a one-time increase in government expenditures on goods and services 
C) inflation 
D) excess wage demands 
E) a persistent increase in the quantity of money

Question 20

According to real business cycle theory,an increase in productivity ________ the demand for loanable funds,________ the demand for labour,and ________ the supply of labour.The real interest rate will ________.

Accepted Answer

A) increase;increases;does not change;fall 
B) increase;increases;does not change;rise 
C) decrease;decreases;decreases;fall 
D) increases;increases;increases;rise 
E) increases;increases;increases;fall 
A) increase;increases;does not change;fall 
B) increase;increases;does not change;rise 
C) decrease;decreases;decreases;fall 
D) increases;increases;increases;rise 
E) increases;increases;increases;fall

Exam 28: Canadian Inflation, Unemployment, and Business Cycle

In real business cycle theory,the supply of labour

Which of the following are business cycle theories that regard fluctuations in aggregate demand as the factor that creates business cycles? I.Keynesian cycle theory II.real business cycle theory III.monetarist cycle theory

Stagflation occurs when the economy experiences both

For a given expected inflation rate,the higher the unemployment rate,the lower is the actual inflation rate.This relationship is the ________ Phillips curve.When the expected inflation rate changes,this is shown as a movement along the ________ Phillips curve.

If there is a fully anticipated increase in the inflation rate

In real business cycle theory,________ are the main source of economic fluctuations.

According to real business cycle theory,a fall in the real interest rate ________ the supply of labour and ________ employment.

According to real business cycle theory,if the Bank of Canada increases the quantity of money when real GDP decreases,real GDP

Suppose that a severe shock that decreases the demand for loanable funds hits Canada.Which of the following can we expect to occur according to real business cycle theory?

If the natural unemployment rate increases,the long-run Phillips curve ________,the short-run Phillips curve ________,and the expected inflation rate ________.

According to the real business cycle theory,what effects follow from a change in productivity? I.Investment demand changes. II.The demand for labour changes. III.Government expenditure changes.

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 current inflation rate is 4 percent,what is the current unemployment rate?

In real business cycle theory,the supply of labour

At full employment an increase in the quantity of money (ceteris paribus)can create a

Which of the following would cause the aggregate demand curve to keep shifting rightward year after year?

According to real business cycle theory,an increase in productivity ________ the demand for loanable funds,________ the demand for labour,and ________ the supply of labour.The real interest rate will ________.

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

For a given expected inflation rate,the higher the unemployment rate,the lower is the actual inflation rate.This relationship is the Phillips curve.When the expected inflation rate changes,this is shown as a movement along the Phillips curve.

According to real business cycle theory,a fall in the real interest rate the supply of labour and employment.

If the natural unemployment rate increases,the long-run Phillips curve ,the short-run Phillips curve ,and the expected inflation rate .

According to real business cycle theory,an increase in productivity the demand for loanable funds, the demand for labour,and the supply of labour.The real interest rate will .