Exam 12: Inflation, Jobs, and the Business Cycle

Suppose that a severe shock that decreases the demand for loanable funds hits the United States.Which of the following can we expect to occur according to the real business cycle model?

What is the factor that leads to business cycles in the monetarist cycle theory?

In late 2008,Great Britain's inflation rate fell from 5.2 percent to 4.5 percent while unemployment was increased from 5.4 percent to 6 percent. These changes would be shown as a

Describe how a demand-pull inflation can occur.

Based on the Keynesian theory of the business cycle,if the economy is at its full-employment equilibrium and aggregate demand increases then

Which of the following theories is criticized for assuming the money wage rate is not sticky?

One example of cost-push inflation is an increase in

As far as demand-pull inflation goes,the United States

In a speech to Asia Pacific Economic Cooperation summit in Peru in November 2008,President Hu of China commented on his country's $586 billion fiscal stimulus plan by saying,"Instead of relying mainly on investment and export we will adopt a coordinated approach that combines consumption,investment and export to boost the economy.And instead of relying heavily on higher consumption of material resources we will achieve development by making scientific and technological progress." If his country's plan works and the expected inflation rate does not change,there will be a

-In the above figure,suppose that the economy currently is at point A.If the inflation rate rises and this rise is anticipated by the public,the economy moves to a point such as point

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,the government increases its expenditure on goods and services.Draw the new aggregate demand and short-run aggregate supply curves in the figure to show the effects of this event 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 the short-run aggregate supply and aggregate demand? e) What are the new long-run equilibrium real GDP and price level?

As the money wage rate rises,

By itself,a fall in the price of oil shifts the

-In the above figure,suppose that the economy is at point C.If the inflation rate is lower than expected,

In the short run,an unexpected increase in the inflation rate leads to

A higher price for oil shifts the

Demand-pull inflation starts as the

If people correctly expect an increase in aggregate demand,their money wage rate ________ immediately,the SAS curve shifts ________.

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

At the start of a cost-push inflation,