Exam 12: Inflation, Jobs, and the Business Cycle

Inflation can be started by

For a cost-push inflation to occur,oil price increases must be accompanied by

Which of the following leads to a rightward shift in the short-run Phillips curve? I. a reduction in the expected inflation rate II. an increase in the natural unemployment rate

-In the above figure,what factor might have lead to the shift in the short-run Phillips curve from SRPC₁ to SRPC₂?

The short-run Phillips curve is vertical at the natural unemployment rate.

Demand-pull inflation is an inflation that results from an initial ________.

According to the real business cycle (RBC) theory,during a recession the demand for labor ________ and the supply of labor ________.

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.Atlantia's Central Bank then increases the quantity of money year after year.Draw the necessary curves in the figure to show the effects of this on Atlantia's real GDP and price level. a) What happens to Atlantia's potential GDP? b) In the short run,what happens to aggregate supply and aggregate demand? c) What are the new short-run equilibrium real GDP and price level? d) In the long run,what happens to aggregate supply and aggregate demand? e) In the long run,what process is unfolding?

Stagflation is associated with

The Phillips curve describes the relationship between real GDP and inflation.

A story from www.ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy noted that "Ireland's story is unique: a small,English-speaking,non-industrialized country on the edge of Europe was able to secure structural funds from the EU,cut taxes,deregulate faster than its neighbours and attract lots of foreign companies in the process." If the natural rate of unemployment in Ireland decreased as a result of these policies,then ________ would shift ________.

Which of the following is NOT one of the criticisms of real business cycle theory?

What is the impulse in the real business cycle theory of the business cycle?

How do defenders of the real business cycle theory,(RBC theory) respond to critics of the theory?

In a story from www.Forbes.com (5/30/2003),it was reported that the Chief Technology Officer of the U.S.plans for the country to spend $58.1 billion on technology that year.He was planning to buy technology from Cisco Systems,Oracle and Sun Microsystems in addition to other software makers. This story reports on technological change which is the stressed in the ________ of business cycles.

-In the above figure,the economy is at point A.The inflation rate falls by two percentage points and people correctly expected the fall.As a result,the economy moves to point

6 Numeric and Graphing Questions -Suppose the natural unemployment rate is 4 percent and the expected inflation rate is 6 percent.In the above figure,illustrate the long-run Phillips curve.What does the long-run Phillips curve reveal abut the long-run tradeoff between inflation and unemployment?

Cost-push inflation can start with

-In the above figure,which of the following curves represents the long-run Phillips curve?

Suppose that managers forecasted a large decline in expected sales and profits and so their confidence plummets.According to the ________,this forecast might start a business cycle.