Exam 28: The Business Cycle, Inflation, and Deflation

Use the figure below to answer the following questions. Figure 28.2.3 -Refer to Figure 28.2.3. Assume that the figure illustrates an economy initially in equilibrium at the intersection of the SAS₀ curve and the AD₀ curve. If the aggregate demand curve is expected to remain at AD₀ but shifts to AD₁, the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Use the figure below to answer the following questions. Figure 28.2.6 -Refer to Figure 28.2.6. Starting at point A, the initial effect of a demand-pull inflation is a move to point ________. As a demand-pull inflation spiral proceeds, it follows the path ________.

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.

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 questions. Figure 28.4.1 -Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the current inflation rate is 4 percent, what is the natural unemployment rate?

Use the table below to answer the following questions. Table 28.4.2 -The economy's natural unemployment rate is 4 percent. Table 28.4.2 gives some points on the economy's short-run Phillips curve. If the expected inflation rate rises to 8 percent a year,

Use the table below to answer the following questions. Table 28.4.2 -The economy's natural unemployment rate is 4 percent. Table 28.4.2 gives some points on the economy's short-run Phillips curve. When the unemployment rate is 4 percent,

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 key difference between new classical cycle theory and new Keynesian cycle theory is that the new classical cycle theory believes that ________ while the new Keynesian cycle theory believes that ________.

A correctly anticipated increase in the quantity of money, in an economy with an unchanging long-run aggregate supply, will result in

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?

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

Use the figure below to answer the following question. Figure 28.2.5 -Refer to Figure 28.2.5. Which one of the graphs in the figure represents an economy experiencing stagflation?

Use the figure below to answer the following questions. Figure 28.2.2 -Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run aggregate supply curve shifts leftward from SAS₀ to SAS₁, ceteris paribus, then people expect

Use the figure below to answer the following questions. Figure 28.2.2 -Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run aggregate supply curve shifts leftward from SAS₀ to SAS₁, ceteris paribus, then the actual inflation rate

Use the figure below to answer the following questions. Figure 28.4.1 -Refer to Figure 28.4.1. 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.

Deflation ends with

Use the figure below to answer the following questions. Figure 28.4.1 -Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the current inflation rate is 4 percent, what is the current unemployment rate?

Use the table below to answer the following questions. Table 28.4.1 -Refer to Table 28.4.1. 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.