Question 1

According to the ________ theory,technological change can be so rapid that some existing capital becomes obsolete and ________.

Accepted Answer

A)  real business cycle; aggregate demand increases 
B)  new classical; productivity falls 
C)  new classical; aggregate demand increases 
D)  real business cycle; productivity falls 
A)  real business cycle; aggregate demand increases 
B)  new classical; productivity falls 
C)  new classical; aggregate demand increases 
D)  real business cycle; productivity falls

Question 2

Demand-pull inflation starts with

Accepted Answer

A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  an increase in short-run aggregate supply. 
D)  a decrease in short-run aggregate supply. 
A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  an increase in short-run aggregate supply. 
D)  a decrease in short-run aggregate supply.

Question 3

To stop a demand-pull inflation using monetary policy,you would recommend that the Fed

Accepted Answer

A)  increase the quantity of money. 
B)  not increase the quantity of money. 
C)  increase tax rates. 
D)  purchase government bonds in the open market. 
A)  increase the quantity of money. 
B)  not increase the quantity of money. 
C)  increase tax rates. 
D)  purchase government bonds in the open market.

Question 4

8 Extended Problems
  
-The figure above shows the initial aggregate demand curve,AD₀,the initial short-run aggregate supply curve,SAS₀,and the long-run aggregate supply curve,LAS.The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium.The economy is initially at point A.Then,Atlantia's oil producers form a price-fixing organization and increase the price of oil.Suppose that potential GDP does not change and that Atlantia's Central Bank responds by increasing the quantity of money.Draw necessary curves in the figure to show the effects of this on Atlantia's real GDP and price level.
a) In the short run,what happens to aggregate supply and aggregate demand?
b) What are the new short-run equilibrium real GDP and price level?
c) In the long run,if Atlantia's continue to hike the price of oil and the Central Bank continues to increase the quantity of money,what happens to aggregate supply and aggregate demand?
d) If Atlantia's oil producers continue to hike the price of oil and Atlantia's Central Bank responds by increasing the quantity of money,what process unfolds?

Accepted Answer

@#IMG-DLM& 
a)See the figure above.The increased p

Question 5

For a given level of anticipated inflation and natural unemployment rate,the short-run Phillips curve shows the relationship between

Accepted Answer

A)  potential GDP and real GDP. 
B)  real GDP growth and the unemployment rate. 
C)  inflation and money growth. 
D)  inflation and the unemployment rate. 
A)  potential GDP and real GDP. 
B)  real GDP growth and the unemployment rate. 
C)  inflation and money growth. 
D)  inflation and the unemployment rate.

Question 6

Keynesians believe that

Accepted Answer

A)  money wage rate adjustments will quickly eliminate unemployment. 
B)  aggregate demand changes tend to induce aggregate supply changes, offsetting any effect from changes in government expenditures. 
C)  the economy will normally operate at full employment. 
D)  a change in business confidence can affect the amount of investment in the economy. 
A)  money wage rate adjustments will quickly eliminate unemployment. 
B)  aggregate demand changes tend to induce aggregate supply changes, offsetting any effect from changes in government expenditures. 
C)  the economy will normally operate at full employment. 
D)  a change in business confidence can affect the amount of investment in the economy.

Question 7

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is

Accepted Answer

A)  sticky money wage rates. 
B)  rational expectations based on complete information. 
C)  changes in the growth rate of productivity. 
D)  None of the above answers is correct. 
A)  sticky money wage rates. 
B)  rational expectations based on complete information. 
C)  changes in the growth rate of productivity. 
D)  None of the above answers is correct.

Question 8

Cost-push inflation might initially result from

Accepted Answer

A)  an increase in the quantity of money. 
B)  the use of new technology. 
C)  an increase in government expenditure. 
D)  an increase in the cost of resources. 
A)  an increase in the quantity of money. 
B)  the use of new technology. 
C)  an increase in government expenditure. 
D)  an increase in the cost of resources.

Question 9

"Shoe Industry under Pressure Amid Rising Costs " Rising costs have forced about 15 per cent of shoe manufacturers in a major south China industrial centre to shut down or relocate in the past year...[the firms have] identified rising wages as a key factor behind the closures and relocations from Dongguan...The problems in the footwear industry reflect broader issues affecting manufacturers across China's Pearl River Delta..."
Www)ft.com,2/26/2008
As the same pressures affect other industries across China,we expect to see

Accepted Answer

A)  demand-pull inflation. 
B)  a combination of cost-push and demand-pull inflation. 
C)  cost-push inflation. 
D)  a downward movement along the short-run Phillips curve. 
A)  demand-pull inflation. 
B)  a combination of cost-push and demand-pull inflation. 
C)  cost-push inflation. 
D)  a downward movement along the short-run Phillips curve.

Question 10

Which theory assumes that business cycles occur because of changes in business confidence?

Accepted Answer

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

Question 11

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

Accepted Answer

A) True 
 B)False

Question 12

In a real business cycle model,labor supply

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. 
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.

Question 13

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

Accepted Answer

A)  new classical theory of the business cycle. 
B)  Keynesian theory of the business cycle. 
C)  new Keynesian theory of the business cycle. 
D)  real business cycle theory. 
A)  new classical theory of the business cycle. 
B)  Keynesian theory of the business cycle. 
C)  new Keynesian theory of the business cycle. 
D)  real business cycle theory.

Question 14

If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

Accepted Answer

A)  there will be no inflationary gap. 
B)  real GDP will begin to decrease more rapidly than if the quantity of money had remained constant. 
C)  money wages will fall to reduce the unemployment. 
D)  there is the risk of continued inflation. 
A)  there will be no inflationary gap. 
B)  real GDP will begin to decrease more rapidly than if the quantity of money had remained constant. 
C)  money wages will fall to reduce the unemployment. 
D)  there is the risk of continued inflation.

Question 15

Demand-pull inflation persists because of

Accepted Answer

A)  continuing increases in government expenditures. 
B)  continuing increases in the quantity of money. 
C)  continuing increases in real wage rates. 
D)  continuing increases in aggregate supply. 
A)  continuing increases in government expenditures. 
B)  continuing increases in the quantity of money. 
C)  continuing increases in real wage rates. 
D)  continuing increases in aggregate supply.

Question 16

Distinguish between the short-run and long-run Phillips curves.

Accepted Answer

The long-run Phillips curve shows the re

Question 17

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the ________ of the business cycle.

Accepted Answer

A)  real business cycle theory 
B)  productivity theory 
C)  dynamic general equilibrium theory 
D)  Keynesian cycle theory 
A)  real business cycle theory 
B)  productivity theory 
C)  dynamic general equilibrium theory 
D)  Keynesian cycle theory

Question 18

In real business cycle theory,the factor leading to a business cycle is

Accepted Answer

A)  changes in investment. 
B)  changes in the quantity of money. 
C)  unexpected changes in aggregate demand. 
D)  fluctuations in the pace of technological change. 
A)  changes in investment. 
B)  changes in the quantity of money. 
C)  unexpected changes in aggregate demand. 
D)  fluctuations in the pace of technological change.

Question 19

The real business cycle theory asserts that changes in ________ lead to changes in ________.

Accepted Answer

A)  the quantity of money; real GDP 
B)  technology; productivity 
C)  animal spirits; real GDP 
D)  consumption expenditure; real GDP 
A)  the quantity of money; real GDP 
B)  technology; productivity 
C)  animal spirits; real GDP 
D)  consumption expenditure; real GDP

Question 20

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase.Other things remaining the same,________.

Accepted Answer

A)  long-run aggregate supply decreases 
B)  real GDP remains at potential GDP 
C)  real GDP increases above potential GDP 
D)  real GDP decreases below potential GDP 
A)  long-run aggregate supply decreases 
B)  real GDP remains at potential GDP 
C)  real GDP increases above potential GDP 
D)  real GDP decreases below potential GDP

According to the theory,technological change can be so rapid that some existing capital becomes obsolete and .

Demand-pull inflation starts with

To stop a demand-pull inflation using monetary policy,you would recommend that the Fed

For a given level of anticipated inflation and natural unemployment rate,the short-run Phillips curve shows the relationship between

Keynesians believe that

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is

Cost-push inflation might initially result from

Which theory assumes that business cycles occur because of changes in business confidence?

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

In a real business cycle model,labor supply

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

If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

Demand-pull inflation persists because of

Distinguish between the short-run and long-run Phillips curves.

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the ________ of the business cycle.

In real business cycle theory,the factor leading to a business cycle is

The real business cycle theory asserts that changes in lead to changes in .

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase.Other things remaining the same,________.

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

According to the ________ theory,technological change can be so rapid that some existing capital becomes obsolete and ________.

Demand-pull inflation starts with

To stop a demand-pull inflation using monetary policy,you would recommend that the Fed

For a given level of anticipated inflation and natural unemployment rate,the short-run Phillips curve shows the relationship between

Keynesians believe that

Real business cycle (RBC) theory predicts that the main source of economic fluctuations is

Cost-push inflation might initially result from

Which theory assumes that business cycles occur because of changes in business confidence?

The real business cycle theory views fluctuations in the quantity of money as the main source of business cycles.

In a real business cycle model,labor supply

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

If the Fed responds to an initial increase in aggregate demand by increasing the quantity of money,

Demand-pull inflation persists because of

Distinguish between the short-run and long-run Phillips curves.

The theory that regards random fluctuations in productivity as the main source of economic fluctuations is the ________ of the business cycle.

In real business cycle theory,the factor leading to a business cycle is

The real business cycle theory asserts that changes in ________ lead to changes in ________.

Suppose that the economy is at full employment and aggregate demand increases by more than it is anticipated to increase.Other things remaining the same,________.

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

According to the theory,technological change can be so rapid that some existing capital becomes obsolete and .

The real business cycle theory asserts that changes in lead to changes in .