Question 1

The Keynesian explanation of the business cycle rests on several concepts,including

Accepted Answer

A)  rigid money wage rates. 
B)  unstable monetary policy by the Fed. 
C)  shocks to the rate of technological change. 
D)  the desire of politicians to be re-elected. 
A)  rigid money wage rates. 
B)  unstable monetary policy by the Fed. 
C)  shocks to the rate of technological change. 
D)  the desire of politicians to be re-elected.

Question 2

Which of the following is TRUE regarding the monetarist theory of the business cycle?
I. Monetarists assume that the quantity of money increases at a constant rate.
II. Fluctuations in interest rates cause business cycles.
III. Changes in the growth rate of the quantity of money affect aggregate demand.

Accepted Answer

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

Question 3

The anticipated inflation rate is 5 percent.In order for purchasing power to remain constant,the money wage rate must rise by

Accepted Answer

A)  2 percent. 
B)  5 percent. 
C)  7 percent. 
D)  12 percent. 
A)  2 percent. 
B)  5 percent. 
C)  7 percent. 
D)  12 percent.

Question 4

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

Accepted Answer

A)  expected changes in aggregate demand. 
B)  expected changes in aggregate supply. 
C)  unexpected changes in aggregate demand. 
D)  unexpected changes in aggregate supply. 
A)  expected changes in aggregate demand. 
B)  expected changes in aggregate supply. 
C)  unexpected changes in aggregate demand. 
D)  unexpected changes in aggregate supply.

Question 5

Suppose that last year the economy of Suffera was experiencing an expected inflation rate of 8 percent and unemployment rate of 12 percent.An unexpected increase in the inflation rate would

Accepted Answer

A)  increase the unemployment rate. 
B)  increase the inflation rate and decrease the unemployment rate. 
C)  increase the inflation rate but have no effect on the unemployment rate. 
D)  None of the above answers is correct. 
A)  increase the unemployment rate. 
B)  increase the inflation rate and decrease the unemployment rate. 
C)  increase the inflation rate but have no effect on the unemployment rate. 
D)  None of the above answers is correct.

Question 6

A decrease in the expected inflation rate leads to ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

Accepted Answer

A)  an upward shift; no shift 
B)  a leftward shift; an upward shift 
C)  no shift; no shift 
D)  no shift; a downward shift 
A)  an upward shift; no shift 
B)  a leftward shift; an upward shift 
C)  no shift; no shift 
D)  no shift; a downward shift

Question 7

-In the above figure,the economy initially is at point A and then an increase in the quantity of money moves the economy to point D.At point D,the real wage rate has

Accepted Answer

A)  risen by the same percentage as the price level. 
B)  remained constant. 
C)  risen. 
D)  fallen. 
A)  risen by the same percentage as the price level. 
B)  remained constant. 
C)  risen. 
D)  fallen.

Question 8

Which of the following could NOT start a demand-pull inflation?

Accepted Answer

A)  increases in government expenditure 
B)  increases in net exports 
C)  increases in oil prices 
D)  increases in the quantity of money 
A)  increases in government expenditure 
B)  increases in net exports 
C)  increases in oil prices 
D)  increases in the quantity of money

Question 9

Stagflation results from

Accepted Answer

A)  a leftward shift in the short-run aggregate supply curve. 
B)  a rightward shift in the aggregate demand curve. 
C)  a rightward shift in the short-run aggregate supply curve. 
D)  an increase in government expenditures financed by an increase in the quantity of money. 
A)  a leftward shift in the short-run aggregate supply curve. 
B)  a rightward shift in the aggregate demand curve. 
C)  a rightward shift in the short-run aggregate supply curve. 
D)  an increase in government expenditures financed by an increase in the quantity of money.

Question 10

Cost-push inflation can be started by

Accepted Answer

A)  a decrease in the money wage rate. 
B)  an increase in the money prices of raw materials. 
C)  an increase in the quantity of money. 
D)  a decrease in government expenditure on goods and services. 
A)  a decrease in the money wage rate. 
B)  an increase in the money prices of raw materials. 
C)  an increase in the quantity of money. 
D)  a decrease in government expenditure on goods and services.

Question 11

Which of the following would shift the aggregate demand curve leftward 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)  negative growth 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)  negative growth in the quantity of money

Question 12

The factor leading to business cycles in the real business cycle theory is changes in the growth rate of

Accepted Answer

A)  the quantity of money. 
B)  productivity. 
C)  labor supply. 
D)  the money wage rate. 
A)  the quantity of money. 
B)  productivity. 
C)  labor supply. 
D)  the money wage rate.

Question 13

Compare and contrast the Keynesian and Monetarist business cycle theories.

Accepted Answer

Both theories are centered about changes

Question 14

-In the above figure,suppose the economy is at point A.An expected increase in the inflation rate to 6 percent will result in a movement 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 15

Explain how the short-run and long-run Phillips curves are related.

Accepted Answer

The short-run Phillips curve is the rela

Question 16

What are criticisms of the real business cycle theory?

Accepted Answer

Four criticisms of the real business cyc

Question 17

Using the Phillips curves,what are the short-run and long-run effects of a decrease in the inflation rate?

Accepted Answer

In the short run,there is first a downwa

Question 18

A rational expectation is

Accepted Answer

A)  a forecast devoid of all emotions. 
B)  a forecast which perfectly foretells the future. 
C)  the best possible forecast based upon all relevant information. 
D)  the forecast that automatically carries over from past forecasts. 
A)  a forecast devoid of all emotions. 
B)  a forecast which perfectly foretells the future. 
C)  the best possible forecast based upon all relevant information. 
D)  the forecast that automatically carries over from past forecasts.

Question 19

-In the above figure,suppose the economy has moved from point A to point C.According to the monetarist theory of the business cycle,what could have caused this movement?

Accepted Answer

A)  an increase in the money wage rate 
B)  an increase in the growth rate of the quantity of money 
C)  a decrease in the growth rate of the quantity of money 
D)  an increase in uncertainty 
A)  an increase in the money wage rate 
B)  an increase in the growth rate of the quantity of money 
C)  a decrease in the growth rate of the quantity of money 
D)  an increase in uncertainty

Question 20

Keynes used the term "animal spirits" to represent

Accepted Answer

A)  changes in people's consumption expenditures. 
B)  the ease of forecasting. 
C)  fluctuations in business confidence. 
D)  investment based on hard facts about the future. 
A)  changes in people's consumption expenditures. 
B)  the ease of forecasting. 
C)  fluctuations in business confidence. 
D)  investment based on hard facts about the future.

The Keynesian explanation of the business cycle rests on several concepts,including

The anticipated inflation rate is 5 percent.In order for purchasing power to remain constant,the money wage rate must rise by

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

Suppose that last year the economy of Suffera was experiencing an expected inflation rate of 8 percent and unemployment rate of 12 percent.An unexpected increase in the inflation rate would

A decrease in the expected inflation rate leads to in the long-run Phillips curve and in the short-run Phillips curve.

-In the above figure,the economy initially is at point A and then an increase in the quantity of money moves the economy to point D.At point D,the real wage rate has

Which of the following could NOT start a demand-pull inflation?

Stagflation results from

Cost-push inflation can be started by

Which of the following would shift the aggregate demand curve leftward year after year?

The factor leading to business cycles in the real business cycle theory is changes in the growth rate of

Compare and contrast the Keynesian and Monetarist business cycle theories.

-In the above figure,suppose the economy is at point A.An expected increase in the inflation rate to 6 percent will result in a movement to point

Explain how the short-run and long-run Phillips curves are related.

What are criticisms of the real business cycle theory?

Using the Phillips curves,what are the short-run and long-run effects of a decrease in the inflation rate?

A rational expectation is

-In the above figure,suppose the economy has moved from point A to point C.According to the monetarist theory of the business cycle,what could have caused this movement?

Keynes used the term "animal spirits" to represent

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

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

Exam 12: Inflation, Jobs, and the Business Cycle

The Keynesian explanation of the business cycle rests on several concepts,including

The anticipated inflation rate is 5 percent.In order for purchasing power to remain constant,the money wage rate must rise by

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

Suppose that last year the economy of Suffera was experiencing an expected inflation rate of 8 percent and unemployment rate of 12 percent.An unexpected increase in the inflation rate would

A decrease in the expected inflation rate leads to ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

-In the above figure,the economy initially is at point A and then an increase in the quantity of money moves the economy to point D.At point D,the real wage rate has

Which of the following could NOT start a demand-pull inflation?

Stagflation results from

Cost-push inflation can be started by

Which of the following would shift the aggregate demand curve leftward year after year?

The factor leading to business cycles in the real business cycle theory is changes in the growth rate of

Compare and contrast the Keynesian and Monetarist business cycle theories.

-In the above figure,suppose the economy is at point A.An expected increase in the inflation rate to 6 percent will result in a movement to point

Explain how the short-run and long-run Phillips curves are related.

What are criticisms of the real business cycle theory?

Using the Phillips curves,what are the short-run and long-run effects of a decrease in the inflation rate?

A rational expectation is

-In the above figure,suppose the economy has moved from point A to point C.According to the monetarist theory of the business cycle,what could have caused this movement?

Keynes used the term "animal spirits" to represent

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

Fiscal Policy

Monetary Policy

International Trade Policy

Introduction

Monitoring Macroeconomic Performance

Macroeconomic Trends

Macroeconomic Fluctuations

Macroeconomic Policy

Filters

A decrease in the expected inflation rate leads to in the long-run Phillips curve and in the short-run Phillips curve.