Exam 12: The Business Cycle, Inflation, and Deflation

During a deflation, investment ________ and the rate of capital accumulation ________.

Cost-push inflation can start with

If the real interest rate is 4 percent and workers expect real wages to be 2 percent higher next year, according to the real business cycle theory, workers will work

According to the new classical theory, ________ policy changes have NO effect on real GDP and according to the new Keynesian theory, ________ policy changes have an effect on real GDP.

Demand-pull inflation results from continually increasing the quantity of money, which leads to a continually

As far as cost-push inflation goes, the United States

One assumption of the new classical model is that

For monetarists, the main cause of economic fluctuations is represented by changes in

An increase in the money wage rate shifts the SAS curve ________ and an increase in the money prices of raw materials shifts the SAS curve ________.

Along the long-run Phillips curve

-In the above figure, the economy is at point A. An increase in oil prices that sets off a cost-push inflation will initially move the economy from point A to point

By itself, an increase in the price of oil shifts the

Which of the following pieces of evidence is most consistent with the monetarist theory?

Stagflation is associated with

A larger than expected increase in aggregate demand will lead to ________ in the ________ of the business cycle.

During which decade did the United States suffer from the worst cost-push inflation?

What is the intertemporal substitution effect and what role does it play in the real business cycle model?

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

The ________ theory of the business cycle asserts that expected and unexpected changes in aggregate demand lead to fluctuations in real GDP.

"The long-run Phillips curve is downward sloping." Is the previous statement correct or incorrect?